Final accounts Trading profit and loss and balance sheet in Accounting

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Final accounts Trading 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

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.

Formal of Trading Account for the year ending

Particular Dr.AmountParticular Cr.Amount
To opening stockXxxxBy sales

 – Sales Return (return Inward)

Xxx
To Purchase

Purchase Return

/ Return Inward

XxxxxxBy closing stockXXX
To wages
To wages and salariesXxxx
To carriage or carriage inwardXxx
To carriage of purchaseXxx
To gas fuel and powerXxx
To freight ,octroi and cartageXxx
To manufacturing expense

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 discountXxxXXX
To repairsXxxxxxxxxxx
To deprecation
To bank chargesXxxxxxxxx
To Conveyance
To N/P transfer to capital A/CxxxxTo N/L transfer to capital A/Cxxxx
xxxxxxxxxxx

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  xxxxFurnitureXXX
– Drawing xxxxLoose toolsxxx
+ NP / – N/LMotor Vehiclexxx
+ Interest of capitalXxxxLong term investmentxxx
– Interest on drawingPlant and machinery
Patent and goodwillxxxx
xxxxxxxx

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

DebitAmountCreditAmount
Stock (1/4/12)20,000Sundry Creditors15,000
Purchase75000Purchase returns3000
Sales Return8,000Sales250,000
Freight and carriage7,500Commission3,300
Wages36,500Capital170,000
Salaries12,000Interest on Bank Deposit2,000
Repairs1,200B/P6,200
Trade expense4,000
Rent and Taxes24,000
Cash in Hand5,700
B/R4,000
Debtor55,000
Plant and machinery1,60,000
Withdrawal (Drawing)16,000
Bank Deposit20,000
4,49,0004,49,000

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
2,67,0002,67000

 

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
136300136,300
Balance Sheet as on …….
Liabilities creditAmountAssets debitAmount
Cash in Hand5,700
Capital 1,70,000B/R4,000
+ N/P 95100Debtors55,000
– Drawing 16,600248500Plant and machinery1,60,000
Bank deposit20,000
Sundry creditor15,000Closing stock25,000
B/P6,200
269700269700

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

ParticularAmountAmount
Wages110,000
Salaries2,20,000
  • Wages outstanding10,000
  • Salary outstanding 20,000

Solution

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

120,000

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

2,40,000

Balance sheet as on

LiabilitiesAmountAssetAmount
O/S Salary20,000
O/S wages10,000

 

Prepaid expense
ParticularAmountAmount
Insurance12,000

 

  • Out of insurance Rs. 12,000   Rs 3000 is prepaid Insurance

Solution

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

9,000

Balance sheet as on

LiabilitiesAmountAssetAmount
Prepaid Insurance3,000

 

Depreciation adjustment 

Trail Balance

ParticularAmountAmount
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

LiabilitiesAmountAssetAmount
Machinery  100000

– Dep. on Machinery 10,000

90,000

 

Accrued Income
ParticularAmountAmount
Income20,000

Income earned Rs 4000.

Solution

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

24,000

 

Balance sheet as on

LiabilitiesAmountAssetAmount
Accrued Income4,00

Unearned Income

ParticularAmountAmount
Rent28,000

Rent received in advance Rs 4000.

Solution

P/L A/c for the year ending

Particular AmountParticularAmount
By Rent 28,000

 – Unearned Rent 4000

24,000

Balance sheet as on

LiabilitiesAmountAssetAmount
Unearned Rent 4,000

Interest on capital

ParticularAmountAmount
Capital200,000
Drawing 20,000

Interest on capital is to charge @10%

And Interest on Drawing @ 10%

Solution

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

LiabilitiesAmountAssetAmount
Capital A/c 200000

Drawing 20,000

+ interest on capital  20,000

interest on drawing 2000

+ NP/NL

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