Final Account

Trading Account Profit Loss Account Balance Sheet

Trading Account
Trading account is a statement which is prepared by a business firm. It shows the gross
profit of business activities during a specific period. It is a part of the final accounts of the entity.
In other words, the trading account gives details of total sales, total purchases and direct
expenses relating to purchase and sales.

Trading account format

Particulars Rs Rs Particulars Rs Rs

To Opening Stock Xxx By Sales Xxx

To Purchase Xxx Less: Returns Inward Xxx Xxx

Less: Return Outward Xxx Xxx By Closing Stock Xxx

To Wages Xxx By Gross Loss C/D XX

( Transferred To P&L
ACC)

To Freight Xxx

To Carriage Inwards Xxx

Clearing Charges Xxx

To Packing Charges Xxx

To Dock Dues Xxx

To Power (Factory) Xxx

To Trading Expenses Xxx

To Factory Duty Xxx

To Gross Profit C/D

( Transferred To P&L
Acc)
 Xxx xxx

Profit and Loss Account:

The Profit & Loss A/c is a periodic statement, which shows the net result of business
operations for a specified period. All the expenses incurred and incomes earned during the
reporting period are recorded here.

Profit and Loss account format

Particular Rs Rs Particular Rs Rs
To Trading account Xxx By Trading Account Xxx
Gross Loss Gross Profit
To Salaries Xxx By Commission Xxx
earned
To Rent and Rates Xxx BY Rent Received Xxx
To Stationeries Xxx By Interest received Xxx
To Postages expenses Xxx By Discount received Xxx
To Insurance Xxx By Net loss xxx
(Transferred to
Capital A/C)
To Repairs Xxx
To General expanses Xxx
To Office expenses Xxx
To Interest Paid Xxx
To BANK charges Xxx
To Sundry expenses Xxx
To Commission paid Xxx
To Discount allowed Xxx
To advertisement Xxx
To Carriage outwards Xxx
ToTraveling expenses Xxx
To Distribution Xxx
expenses
To Repacking charges Xxx
Too Bad depts. Xxx
To Depreciation Xxx
To Net Profit xxx
(Transferred to
Capital A/C)
XXXX XXXX XXXX XXXX
Balance Sheet:

The Profit & Loss A/c is a period statement, which shows the net result of business
operations for a specified period. All the expenses incurred and incomes earned during the
reporting period are recorded here.

Balance sheet format

Libilites Rs Rs Assets Rs Rs
Capital Xxx Cash in hand Xxx
Add: Net Profit (or) Cash at BANK Xxx
Less: Net Loss Xxx
Xxx Bills receivable Xxx
Less: drawings Xxx Sundry Debtors Xxx
Xxx Investments Xxx
Less: Income Tex Xxx xxx Prepaid expenses Xxx
Sundry Creditors Xxx Furniture & Fittings Xxx
Bills Payable Xxx Plant & Machinery Xxx
BANK overdraft Xxx Land & building Xxx
Outstanding Xxx Business premises Xxx
expenses
Mortgage Loans Xxx Patents & Xxx
Trademark
Reserve Fund Xxx Goodwill Xxx
Provision for tax Xxx Assets xxxx
Less: Depriecation Xxxx Xxx
Accured Income Xxx
Total Xxx Total Xxx
Example Sum :1
From the following information prepare Trading Account for the year ending 31 st
December.2017.

Particulars Rs. Particulars Rs.

Opening stock 52,500 Dock charges on 4,000
Purchased
Cost of goods 12,000 Import duty on 3,500
manufactured purchases
Cash purchases 60,000 Wages 11,000
Cash sales 85,000 Sales returns 3,000
Purchases returns 2,000 Credit purchases 35,000
Carriage inwards 4,000 Credit sales 60,000
Freight outwards 3,000 Other direct expenses 7000

Answer:

Particulars Rs. Rs. Partuculars Rs. Rs.

To Opening Stock 52,500 By Sales:
To Cost of goods 12,000 Cash 85,000
Manufactured Credit 60,000
To Purchases: 1,45,000
Cash 60,000 Less: Sales returns 3,000
Credit 35,000 1,42,000
95,000 By Gross Loss c/d 45,000
Less Purchase Return 2,000
93,000
To Carriage inwards 4,000
To Dock charges on 2,500
Purchases
To Import duty on 3,500
Purchases
To Wages 11,000
To Other direct Exp 7,000
1,87,000 1,87,000
Sum: 2 From the following information, prepare profit and loss account for the year
ended 31st March, 2018.

Particulars Rs.` Particulars Rs.

Gross profit b/d 1,50,000 Advertisement expenses 3,800
Carriage outward 25,500 Bad debts 8,500
Office rent 7,000 Dividend received 9,000
Office stationery 3,500 Discount received 4,600
Distribution expenses 2,000 Rent received 7,000

Solution: Profit and Loss Account for the year ended 31st March, 2018

Particulars ` Particulars `
To Carriage outward 25,500 By Gross profit b/d 1,50,000
To Office rent 7,000 By Dividend received 9,000
To Office stationery 3,500 By Discount received 4,600
To Distribution expenses 2,000 By Rent received 7,000
To Advertisement expenses 3,800
To Bad debts 8,500
To Net profit Transferred to 1,20,300
capital account
1,70,600 1,70,600

Sum:3 From the following balances of Niruban, Prepare balance sheet as on 31st
December, 2017.

Particulars Rs. Particulars Rs.

Plant and machinery 8,00,000 Bank over draft 1,80,000
Land and building 6,00,000 Sundry Creditors 2,40,000
Furniture 1,50,000 Bills Receivable 1,00,000
Cash in hand 20,000 Bills Payable 60,000
Sundry Debtors 3,20,000 Closing Stock 4,00,000
Investments (Short- 80,000 Capital 15,00,000
Term)
Drawings 1,30,000 Net Profit 6,20,000
Total 26,00,000 Total 26,00,000
Solution:

In the books of Niruban

Balance sheet as on 31st December, 2017

Liabilities ` ` Assets ` `
Capital 15,00,000 Land and building 6,00,000
Add: Net profit 6,20,000 Plant and machinery 8,00,000
21,20,000 Furniture 1,50,000
Less: Drawings 1,30,000 Investments (short-term) 80,000
19,90,000 Stock in trade 4,00,000
Creditors 2,40,000 Debtors 3,20,000
Bills payable 60,000 Bills receivable 1,00,000
Bank overdraft 1,80,000 Cash in hand 20,000
24,70,000 24,70,000

Probelom: 1
1) From the following Trial Balance of M/S. Kasturi Agencies, Prepare Trading and profit
Loss A/c for the year ended 31st Dec, 1994 and the Balance Sheet as on that date.

Particulars Rs Rs
Capital A/C 1,00,000
Drawings 18,000
Buildings 15,000
Furniture & Fittings 7,500
Motor van 25,000
Loan from Hari 15,000
Interest Paid 900
Sales 1,00,000
Purchase 75,000
Opening stock 25,000
General Expenses 15,000
Wages 2,000
Insurance 1,000
Commission Received 7,500
Sundry Drs 28,100
BANK Balance 20,000
Sundry Crs. 10,000
2,32,500 2,32,500
 The value of closing stock on 31st Dec. 1994 was Rs. 32,000
[Ans. Gross Profit Rs. 30,000; Net Profit Rs.20, 600; Balance Sheet Total Rs. 1, 27,600]

2) The following is the Trial Balance of Thiru. Nanda as at 31 st Dec 1994 you are asked to
prepare final A/c as on that date.

Particulars Rs Rs
Stock (1.1.1994) 46,800
Sales and Sale Returns 8,600 2,89,600
Capital 1,08,090
Purchase and Purchase Return 2,43,100 5,800
Freight and Carriage 18,600
Rent & Taxes 5,700
Salary and wages 9,300
Sundry drs. And cts 24,000 14,800
BANK interest 900
BANK loan 20,000
Printing & advertisement 14,600
Interest from investement 250
Cash at BANK 8,000
Discount Received 4,190
Investment 5000
Furniture & Fittings 1,800
Discount paid 7,540
General expenses 3,910
Audit fees 700
Insurance 600
Travelling expenses 2,330
Postage expenses 870
Cash in hand 380
Fixed deposits 30,000
Drawings 10,000
4,42,730, 4,42,730

Stock on 31st December 1994 was Rs. 78, 600

[Gross Profit Rs. 56,900; Net Profit Rs. 14,890; Balance Sheet Total Rs. 1, 47,780]
3) From the following Trail balance prepared from the book of Lakshmi Naryanan as on 30 th
June 1995, prepare Trading profit and loss account and a balance sheet.

Particulars Rs Rs
Capital 1,19,400
Drawings 10,550
Bills receivable 9,500
Purchase and Sales 2,56,590 3,56,430
Returns Inwards 2,780
Stock on 1st July 1994 89,680
Commission 5,640
Plant & Machinery 28,800
Salaries 11,000
Traveling expenses 1,880
Sundry Debtors 62,000
Stationery 2000
Telephone Charges 1,370
Interest 5,870
Bad Debts 3,620
Furniture 8,970
Sundry Creditors 59,630
6% loan 20,000
Wages 40, 970
Cash in Hand 530
Cash at BANK 18,970
Insurance 400
Rent and Taxes 5,620
5,61,100 5,61,100
Closing stock in Trade on 30 th June 1995 Rs. 1, 28,960/- [Ans: Gross Profit Rs. 95,370;
Net Profit Rs. 69,250; Balance sheet Total Rs. 2, 57,730]
4) The following balances are extracted from the books of Thiru. Mohan as on 31 st December
1994. Prepare trading, profit & loss, balance sheet.
Stock on hand as on 31.12.94 is Rs. 43,500

Particulars Rs Rs
Capital 60,000
General expenses 2,000
Drawings 8,000
Motive power 6,000
Commission 3,000
BANK overdraft 12,500
Cash in hand 1,250
Stock 1.1.1994 54,500
Furniture 8,500
Loose tools 1,500
Purchases 2,60,000
Carriage Inwards 2,000
Sales 4,22,350
Carriage outwards 3,000
Re- Packing Material 500
Wages 42,000
Insurance 600
Salaries 11,500
Electric charges 1,800
Sundry Creditors 33,000
Sundry Debtors 42,000
Machinery 40,000
Vehicles 60,000
Travelling expenses 1,200
Bills payable 13,000
Discount Received 4,000
Coal & water 6,000
Suspense account 4,500
Ans. Gross Profit Rs. 95,350; Net Profit Rs. 81,750; Balance Sheet Total Rs. 1, 96,750]
5) The following Trial balance of Mrs. Latha, prepare trading and profit & loss account the
Balance sheet for the year ending 31st December 2007.
Stock as on 31st December 2007 is Rs. 62,000/-

Particulars Rs Rs
Cash in hand 2,250
Cash at BANK 17,750
Stock 1.1.2007 36,000
Purchases 1,20,000
Carriage inwards 4,200
Factory rent 6,000
Return outwards 2,000
Sales 2,72,000
Sundry Debtors 28,000
Sundry Creditors 33,000
Wages 12,000
Rent 6,000
Salaries 8,600
Bills Receivable 4,000
Bills Payable 3000
BANK loans 20,000
Insurance 1,200
Advertisement 800
Discount 1,400
Reserve fund 2,400
Furniture 6,000
Machinery 40,000
Business Premises 50,000
Bad debts 400
Drawings 12,000
Income tax 4,000
Return inwards 6000
Capital 31,800
Loan on Mortages 2,400
3,66,600 3,66,600

[Ans. Gross Profit Rs. 1, 51,800; Net Profit Rs. 1, 33,400; Balance Sheet Total Rs. 2,
10,000]
 PROFIT AND LOSS ACCOUNT & BALANCE SHEET ADJUSTMENT SUMS

Problem Sum: 1
Prepare the Trading and Profit loss account and Balance Sheet Books of Mr Nagarajan as on 31st
March 2016. (1-4-2016 Opening Stock- Rs. 1,000)

Particulars Rs Particulars Rs
Purchase 10,000 Sales 15,100
Wages 600 Commission Received 1,900
Freight Inwards 750 Rent Received 600
Advertisement 500 Creditors 2,400
Carriage Outwards 400 Capital 5,000
Cash 1,200 Machinery 8,000
Debtors 2,250 Bills Receiable 300

Adjustement Entry:
1) Commssion received advance Rs. 400 3) Advertisement paid on Advance Rs.150
2) Wages outstanding Rs. 200 4) Closing Stock on 31st March 2016, Rs. 2,100

Answer:

Dr Trading Account Cr

Particulars Rs. Rs. Particulars Rs Rs.

To Opening Stock 1,000 By Sales 15,100
To Purchase 10,000 By Closing Stock 2,100
To Wages 600
Add: Outstanding 200 800
To Freight Inwards 750
To Gross Profit c/d 4,650
Total 17,200 Total 17,200

To Advertisment 500 By Gross Profit B/d 4,650

Less: Prepaid Add 150 350
To Carriage Outwards 400 By Commission Rec 1,900
Less: Rec Advance 400 1,500
By Rent Received 600
Net Profit (Transferred to Capital 6,000
Acc)
Total 6,750 Total 6750
st
Balance Sheet as on 31 March 2016

Particulars Rs Rs Particulars Rs Rs
Capital 5000 Machinery 8,000
Add: Net Profit 6000 11,00 Stock in trade 2,100
Creditors 0 Debtors 300
Commission received Bills Receivable 2,250
in advance 2,400 Advertisement prepaid 150
Outstanding wages Cash in hand 1,200
14,000
400

200
14,00
0

Example Sums:1

Consider the following balances extracted from the books of Jain as on 31st December,
2016. Prepare the final accounts.

Particulars Rs Particulars Rs
Capital 20,000 Office Salaries 6,600
Debtors 8,000 Establishment Expenses 4,500
Creditors 10,500 Selling expenses 2,300
Purchase 60,000 Furniture 10,000
Sales 80,000 Cash at bank 2,400
Income tax 500 Miscellaneous receipts 600
Opening stock 12,000 drawings 4,800
Adjustments:

(a) Salaries Outstanding for Rs. 600

(b) Provide Deprication on Furniture @ 10%
(c) Provide interest on Capital for the year @ 5% p.a
(d) Stock on 31st December 2016 Rs. 14,000.

Prepare Trading and profit Loss account and balance sheet.

Answer: Gross Profit-22,000- Net Profit – 6,600- Balance Sheet Toal – 33,400.
Sum:2

Particulars Rs Particulars Rs.

Purchase 90300 Return outwards 1300
Sales 137200 Capital 50000
Return inwards 2200 Creditors 24000
Stock 1-1-96 40000 Interest 500
Drawings 5000 Commission received 3250
Building 30000 Provision for bad debts 750
Machinery 20000 Bank overdraft 40000
Furniture 8000
Debtors 25000
Wages 3000
Carriage inwards 2000
Rent and Rates 1500
Bad debts 1000
Cash in hand 3500
Investmet 10000
Postages 2500
Insurance 2000
Salaries 11000
2,57,000 2,57,000

Additional information:

1. Value of the Stock 31-12-1996 Rs. 65,000

2. Goods worth Rs. 800 for his Personal use of the Proprietor.
3. Rs. 400 of insurance Advance paid
4. Salary Rs. 1000 the month of dec 1996 has not yet paid outstanding.
5. Deprication on Building @ 2%, Machinery @ 10%, Furniture @ 15% p.a
6. Maintain provision for doubtful detbs @ 5% on Sundry Debtors. Prepare Trading
and Profit Loss Account & Balance Sheet.

Answer: Gross Profit – 66,800- Net Profit-47,650, - Balance Sheet Total -1,56,850.

Sum- 3
Prepare the following trading profit and loss account of M/s Mohit Traders as on 31
March 2017 and draw necessary Journal entries and balance sheet as on that date:

Debit Balances Amount Credit Balances Amount

 Rs. Rs.
Opening stock 24,000 Sales 4,00,000
Purchases 1,60,000 Return outwards 2,000
Cash in hand 16,000 Capital 1,50,000
Cash at bank 32,000 Creditors 64,000
Return inwards 4,000 Bills payable 20,000
Wages 22,000 Commission received 4,000
Fuel and power 18,000
Carriage inwards 6,000
Insurance 8,000
Buildings 1,00,000
Plant 80,000
Patents 30,000
Salaries 28,000
Furniture 12,000
Drawings 18,000
Rent 2,000
Debtors 80,000
6,40,000 6,40,000

Adjustments Rs.
a) Salaries outstanding 12,000
b) Wages outstanding 6,000
c) Commission is Advance 2,400
d) Depreciation on building 5% and plant 3%
e) Insurance paid in advance 700
f) Closing stock 12,000

ANSWER:- Trading ACC Total ( 4,08,000) Gross Profit – 1,74,000

Profit lossAcc Total (1,80,400) Net Profit – 1,23,700 Balance Sheet -3,57,700.