Final accounts Trading Accounts Profit and Loss Accounts and balance sheet in Accounting

Final accounts Trading Accounts Profit and loss and balance sheet in Accounting

What are final Accounts


  • After checking the accuracy of the book of accounts through preparation of trail balance .Next step it to check the profit and loss earned during the year and also the financial position of the business
  • Final Accounts are the accounts, which are prepared at the end of a fiscal year. It gives a precise idea of the financial position of the business/organization to the owners, management, or other interested parties

Final accounts Trading profit and loss and balance sheet in Accounting

Final accounts have three parts
  • Trading A/c
  • Profit and Loss A/c
  • Balance Sheet A/c

What is Trading Account ?


Trading Accounts

Trading accounts is nominal accounts and all expense which are related to either purchase or manufacturing of goods are written on the Dr. side of the trading accounts. Similarly its Cr. side sales and sales return are written in the credit where sale return is deducted from sales .

Closing stock : If the closing stock is given inside the trial balance this will be mean that the entry is incorporated the closing stock in the books has already been passed. It would imply that the closing sock must have been deducted out of purchases accounts. Hence in such a case Closing stock will not be shown in the Trading Account but will appear on the assets side of balance sheet only.

Format of Trading Account for the year 


Particular Dr.


Particular Cr.


To opening stock


By sales

 – Sales Return (return Inward)


To Purchase

-Purchase Return

/ Return Inward


By closing stock


To wages




To wages and salaries




To carriage or carriage inward




To carriage of purchase




To gas fuel and power




To freight ,octroi and cartage




To manufacturing expense




To factory lighting




To productive expense




To Royalty




To Custom duty




To dock charges








 To Gross profit C/d


 By Net Loss C/d











Format of Profit and loss Accounts for the year ending

Particular  Dr.AmountParticular Cr.Amount
To G/L B/dXxxTo G/P B/dXXX
To SalaryxxxBy rent from tenant / Rent 
To salaries and wagesXxxBy discount CrXxx
To rent rate and taxesXxxBy commission crXxx
To printing and stationaryXxxBy interest on invest.Xxx
To mobile or telephoneXxxBy dividend on shareXxx
To Legal chargesXxxBy bad debts recoverXxx
To audit fees XxxBy apprentice premiumXxx
To travelling expenseXxxBy Profit on sale of assetXxx
To establishment expenseXxxBy Income from other sourcexxxx
To trade expenseXxxBy miscellaneous receiptXxxx
To general expenseXxxBy interest on drawingXxx
To Carriage on salesXxx  
To  carriage outwardXxx  
To charity or donation xxx  
To interest of capitalxxx  
To advertisementXXX  
To commissionXxx  
To BreakageXxx  
To Bad debtsXxx  
To export dutyXxx  
To packaging chargesXxx  
To Loss on sale of assetXxx  
To discountXxx XXX
To repairsXxxx xxxxxxx
To deprecation    
To bank chargesXxxx xxxxx
To Conveyance   
To N/P transfer to capital A/CxxxxTo N/L transfer to capital A/Cxxxx
 xxxxx xxxxxx

Format of balance sheet as on_____

Liabilities Cr.AmountAssets Dr..Amount
Bank OverdraftXXXCash In handXxx
Bills payableXxxBill receivableXxx
Sundry CreditorsXxxSundry debtorsXxx
Outstanding expenseXxxShort term investmentxxx
Unearned incomeXxxClosing stockXx
Long term loansXxxPrepaid expenseXxx
ReserveXxxAccrued incomeXxx
Capital  xxxx FurnitureXXX
– Drawing xxxx Loose toolsxxx
+ NP / – N/L Motor Vehiclexxx
+ Interest of capitalXxxxLong term investmentxxx
– Interest on drawing Plant and machinery 
  Patent and goodwillxxxx
 xxxx xxxx

Preparation of Trading Profit and Loss Accounts and Balance sheet from Trading A/c

Trail balance of Sai traders the closing stock at the end of the year Rs 25,000

Stock (1/4/12)20,000Sundry Creditors15,000
Purchase75000Purchase returns3000
Sales Return8,000Sales250,000
Freight and carriage7,500Commission3,300
Salaries12,000Interest on Bank Deposit2,000
Trade expense4,000  
Rent and Taxes24,000  
Cash in Hand5,700  
Plant and machinery1,60,000  
Withdrawal (Drawing)16,000  
Bank Deposit20,000  
 4,49,000 4,49,000

Solution of the question is

Trading A/c for the year ending
Particular DrAmountParticular CrAmount
To opening Stock20,000By sales 2,50,000 
To purchases 75,000 -By sales return 8000242,000
– To P/R 300072,000  
To freight and carriage7,500By closing stock25,000
To wages36,500  
To G/P C/D1,31,000  
 2,67,000 2,67000
Profit and Loss account for the year ending
Particular DrAmountParticular CrAmount
  By G/P B/D131,000
To salaries12,000By commission3,300
To repairs1.200By interest on Bank deposit2,000
To trade expense4,000  
To rent and taxes24,000  
To N/P transfer to capital A/c95,100  
 136300 136,300
Balance Sheet as on …….
Liabilities creditAmountAssets debitAmount
  Cash in Hand5,700
Capital 1,70,000 B/R4,000
+ N/P 95100 Debtors55,000
– Drawing 16,600248500Plant and machinery1,60,000
  Bank deposit20,000
Sundry creditor15,000Closing stock25,000
 269700 269700

Final accounts Trading profit and loss and balance sheet in Accounting with adjustment

Final Accounts with adjustment

  • Adjustment
  • Outstanding expense
  • Prepaid expense
  • Deprecation
  • Accrued
  • Unearned
  • Interest on capital
  • Interest on drawing
Adjustment transactions

The adjustment transactions transactions represent such items of incomes and expenditures, which relate to the current year and have not yet been brought into the book of accounts. Such financial transactions are adjusted after the preparation of trial balance.

Outstanding Expense

Trail balance

  • Wages outstanding10,000
  • Salary outstanding 20,000


Wages A/c Dr.          10,000

     To O/S Wages A/c    10,000

Particular AmountParticularAmount

To wages A/c 1,10,000

+To O/S wages 10,000


Salary A/c Dr. 20,000

To O/S Salary A/c    20,000

Particular AmountParticularAmount

To Salary A/c 2,20,000

+O/S salary 20,000


Balance sheet as on

O/S Salary20,000  
O/S wages10,000  
Prepaid expense
  • Out of insurance Rs. 12,000   Rs 3000 is prepaid Insurance


Prepaid Insurance A/c Dr      3,000
To insurance A/c                          3,000
(being insurance prepaid)

Particular AmountParticularAmount

To Insurance 12,000

— Prepaid Insurance 3000


Balance sheet as on

  Prepaid Insurance3,000
Depreciation adjustment 

Trail Balance

Machinery 100,000 

Depreciation on Machinery 10,000

Solution :

Dep. on Machinery A/c  10,000

 To Machinery A/c                10,000

(Being dep on Machinery)

P/L A/c for the year ending

Particular AmountParticularAmount
To Dep on Machinery 10,000  

Balance sheet as on


Machinery  100000

– Dep. on Machinery 10,000

Accrued Income
Income 20,000

Income earned Rs 4000.


Accrued Income A/c Dr. 4,000

   To income A/c              4,000

P/L A/c for the year ending

Particular AmountParticularAmount

By income 20,000

 + accrued income 4,00


Balance sheet as on

  Accrued Income4,00

Unearned Income

Rent 28,000

Rent received in advance Rs 4000.


P/L A/c for the year ending

Particular AmountParticularAmount

By Rent 28,000

 – Unearned Rent 4000


Balance sheet as on

Unearned Rent 4,000  

Interest on capital

Capital 200,000
Drawing 20,000  

Interest on capital is to charge @10%

And Interest on Drawing @ 10%


Interest on capital A/c Dr 20,000

To Capital A/c                   20,000

Drawing A/c Dr. 2,000

  To interest on Drawing A/c  2,000

Particular AmountParticularAmount
To interest on capital A/c20,000By interest on drawing A/c2,000

Balance sheet as on


Capital A/c 200000

Drawing 20,000

+ interest on capital  20,000

interest on drawing 2000


Scroll to Top