Ram and Raghav were twin brothers. Ram was interested in computer his keen interest in the subject made him take up computer software for his degree course He pleaded with his father Mr. Rangan and purchased a computer for his use at home. Raghav was always interested in sitting at his father's Shop at the nearby market place selling electrical appliances.
Mr. Rangan as unhappy that Raghav showed keen interest in his business but was worried about Ram who would always spend time with computers.
He felt that if the interest of the two sons be put together they could start a flourishing business of their own. The boom in the IT industry made him find ways to satisfy his son's dreams.
After a college, the twins were drifting apart due to varied interests. Rangan decide that this is the time for him to intervene and make decisions for his sons.
He asked Raghav, a commerce graduate to draw up a proposal for the same.
Raghav came out with the following ideas:
The area they lived on and run stop consisted of middle income group families and many of them didn't possess computers at home.
Their shop could provide the following services:
1) computers classes for various age groups.
2) computers using facilities on payment per hourly basis and printing of documents from computers.
3) internet access facilities at the prevailing market rates by entering into contract with VSNL
4) computers game corner for children.

Ram jumped at the idea and they made up a common proposal. Ram wanted that they purchase 10 computers and start with first two areas of operation and expand when things go well.
The shop they lived had at the market place was a single storey building. Their fact her offered to build the first floor business. He spent Rs. 100000 on construction of the business. The sons went to a bank and put up their proposal and managed to get a loan to the extent of 75% of the cost of computers Rs. 400000 with printers.
As the bank manager was aware of the credit worthiness of Mr. Rangan, he advanced the loan of Rs. 300000. Total amount to be repaid will be Rs. 360000 including interest in three annual installment as follows:
1. End of the 1st year Rs. 130000 (Rs.100000+30000 interest)
2. End of the 2nd year Rs. 120000 (Rs.100000+20000 interest)
3. End of the 3rd year Rs. 110000 (Rs. 100000+10000 interest)

They started business on 1 April 1999. Raghav decided to deposit Rs. 240000 in the bank. He gave Rs. 100000 to computer company as 25% of the value of computers purchased and Rs. 300000 out of bank loan availed.
He deposited 1000 for the electrical connection with the Electricity board. He paid a deposited of Rs. 100000 with VSNL for the internet connection. He used the telephone connection at the shop. The brothers got the computers cafe furnished by paying Rs. 25000. Raghav got pamphlets printed and distributed at the cost of Rs. 4500 in the surrounding colonies.
All payments were to be made by cheques. All he receipts were in cash to be deposited in the bank on the same day.
The students on the average paid a monthly fee of Rs. 500 for the 3 months computers evening classes.
Their were a number of internet subscribers and receipts on account of internet facility was Rs. 10000 a month in the first quarter on an average. The decided to buy and sell computer stationary also like floppy disk, CD's etc.

At the end of the year, their results showed the following:

Total revenue including in sale of computer stationary. 498000

Purchases of computer stationary. 55000

Electricity charge at the be paid. 124000

Telephone charges. 34000

Petty expenses. 12000

Entertainment expenses. 10000

Maintenance expenses. 10000


There was helper at their father's Shop who agreed to clean up the computer cafe and fetched water to visitors. For the additional services, he was paid Rs. 500 as month. They withdrew Rs. 3000 by cheque each for their personal expenses. They paid the bank loan regularly. Father was pleased at their son's efficiency.
He wanted to expand business.


1. Jurnalise the above transactions. Post them into ledgers and prepare Trail Balance
2. Prepare Profit and Loss Account balance sheet.
3. Charge depreciation at the rate of 25% on computers, 10% on furniture and 5% on buildings.