26Oct, 2020

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.	Amount	Particular Cr.	Amount
To opening stock	Xxxx	By sales – Sales Return (return Inward)	Xxx
To Purchase -Purchase Return / Return Inward	Xxxxxx	By closing stock	XXX
To wages
To wages and salaries	Xxxx
To carriage or carriage inward	Xxx
To carriage of purchase	Xxx
To gas fuel and power	Xxx
To freight ,octroi and cartage	Xxx
To manufacturing expense	xxx
To factory lighting	Xxx
To productive expense	Xxx
To Royalty	Xxx
To Custom duty	Xx
To dock charges	xxx

To Gross profit C/d	xxx	By Net Loss C/d	Xxx
	Xxxx		xxxx

Format of Profit and loss Accounts for the year ending

Particular Dr.	Amount	Particular Cr.	Amount
To G/L B/d	Xxx	To G/P B/d	XXX
To Salary	xxx	By rent from tenant / Rent
To salaries and wages	Xxx	By discount Cr	Xxx
To rent rate and taxes	Xxx	By commission cr	Xxx
To printing and stationary	Xxx	By interest on invest.	Xxx
To mobile or telephone	Xxx	By dividend on share	Xxx
To Legal charges	Xxx	By bad debts recover	Xxx
To audit fees	Xxx	By apprentice premium	Xxx
To travelling expense	Xxx	By Profit on sale of asset	Xxx
To establishment expense	Xxx	By Income from other source	xxxx
To trade expense	Xxx	By miscellaneous receipt	Xxxx
To general expense	Xxx	By interest on drawing	Xxx
To Carriage on sales	Xxx
To carriage outward	Xxx
To charity or donation	xxx
To interest of capital	xxx


To advertisement	XXX
To commission	Xxx
To Breakage	Xxx
To Bad debts	Xxx
To export duty	Xxx
To packaging charges	Xxx
To Loss on sale of asset	Xxx
To discount	Xxx		XXX
To repairs	Xxxx		xxxxxxx
To deprecation
To bank charges	Xxxx		xxxxx
To Conveyance
To N/P transfer to capital A/C	xxxx	To N/L transfer to capital A/C	xxxx
	xxxxx		xxxxxx

Format of balance sheet as on_____

Liabilities Cr.	Amount	Assets Dr..	Amount
Bank Overdraft	XXX	Cash In hand	Xxx
Bills payable	Xxx	Bill receivable	Xxx
Sundry Creditors	Xxx	Sundry debtors	Xxx
Outstanding expense	Xxx	Short term investment	xxx
Unearned income	Xxx	Closing stock	Xx
Long term loans	Xxx	Prepaid expense	Xxx
Reserve	Xxx	Accrued income	Xxx
Capital xxxx		Furniture	XXX
– Drawing xxxx		Loose tools	xxx
+ NP / – N/L		Motor Vehicle	xxx
+ Interest of capital	Xxxx	Long term investment	xxx
– Interest on drawing		Plant and machinery
		Patent and goodwill	xxxx
	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

Debit	Amount	Credit	Amount
Stock (1/4/12)	20,000	Sundry Creditors	15,000
Purchase	75000	Purchase returns	3000
Sales Return	8,000	Sales	250,000
Freight and carriage	7,500	Commission	3,300
Wages	36,500	Capital	170,000
Salaries	12,000	Interest on Bank Deposit	2,000
Repairs	1,200	B/P	6,200
Trade expense	4,000
Rent and Taxes	24,000
Cash in Hand	5,700
B/R	4,000
Debtor	55,000
Plant and machinery	1,60,000
Withdrawal (Drawing)	16,000
Bank Deposit	20,000
	4,49,000		4,49,000

Solution of the question is

Trading A/c for the year ending

Particular Dr	Amount	Particular Cr	Amount
To opening Stock	20,000	By sales 2,50,000
To purchases 75,000		-By sales return 8000	242,000
– To P/R 3000	72,000
To freight and carriage	7,500	By closing stock	25,000
To wages	36,500

To G/P C/D	1,31,000
	2,67,000		2,67000

Profit and Loss account for the year ending

Particular Dr	Amount	Particular Cr	Amount
		By G/P B/D	131,000
To salaries	12,000	By commission	3,300
To repairs	1.200	By interest on Bank deposit	2,000
To trade expense	4,000
To rent and taxes	24,000
To N/P transfer to capital A/c	95,100

	136300		136,300

Balance Sheet as on …….

Liabilities credit	Amount	Assets debit	Amount
		Cash in Hand	5,700
Capital 1,70,000		B/R	4,000
+ N/P 95100		Debtors	55,000
– Drawing 16,600	248500	Plant and machinery	1,60,000
		Bank deposit	20,000
Sundry creditor	15,000	Closing stock	25,000
B/P	6,200

	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

Particular	Amount	Amount
Wages	110,000
Salaries	2,20,000

Wages outstanding10,000

Salary outstanding 20,000

Solution

Wages A/c Dr. 10,000

To O/S Wages A/c 10,000

Particular

Amount

Particular

Amount

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	Amount	Particular	Amount
To Salary A/c 2,20,000 +O/S salary 20,000	2,40,000

Balance sheet as on

Liabilities	Amount	Asset	Amount

O/S Salary	20,000
O/S wages	10,000

Prepaid expense

Particular	Amount	Amount
Insurance	12,000

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	Amount	Particular	Amount
To Insurance 12,000 — Prepaid Insurance 3000	9,000

Balance sheet as on

Liabilities	Amount	Asset	Amount
		Prepaid Insurance	3,000

Depreciation adjustment

Trail Balance

Particular	Amount	Amount
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	Amount	Particular	Amount
To Dep on Machinery	10,000

Balance sheet as on

Liabilities

Amount

Asset

Amount

Machinery 100000

– Dep. on Machinery 10,000

90,000

Accrued Income

Particular	Amount	Amount
Income		20,000

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	Amount	Particular	Amount
		By income 20,000 + accrued income 4,00	24,000

Balance sheet as on

Liabilities	Amount	Asset	Amount
		Accrued Income	4,00

Unearned Income

Particular	Amount	Amount
Rent		28,000

Rent received in advance Rs 4000.

Solution

P/L A/c for the year ending

Particular

Amount

Particular

Amount

By Rent 28,000

– Unearned Rent 4000

24,000

Balance sheet as on

Liabilities	Amount	Asset	Amount
Unearned Rent	4,000

Interest on capital

Particular	Amount	Amount
Capital		200,000
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	Amount	Particular	Amount
To interest on capital A/c	20,000	By interest on drawing A/c	2,000

Balance sheet as on

Liabilities

Amount

Asset

Amount

Capital A/c 200000

–Drawing 20,000

–+ interest on capital 20,000

–– interest on drawing 2000

–+ NP/NL

20Oct, 2020

What are Ledger Account Definition, Format, Types, and Example ?

What is the meaning of Ledger accounts ?

what is ledger account with example

Ledger accounting definition

A ledger account contains a record of business transactions. It is a separate record within the general ledger that is assigned to a specific asset, liability, equity item, revenue type, or expense type

A ledger is a collection of accounts
We prepared a ledger for a fixed period, usually a month
A ledger is prepared in continuation, viz, month after month.

HOW TO DO POSTING IN LEDGERS

1.First of all we make a journal entries of the transaction.

2.From journal entries we do the posting in the respective ledgers accounts

3.Beginning from the very first entry, we have to see that whose ledger is being prepared, is debited or credited.

4.If the particular ledger account is debited in the journal entry, than we will post it to the debit side of ledger a/c.

Important point while preparing Ledger

POINT TO BE NOTED

if the particular ledger account is credited in the journal entry, than we will post it to the credit of ledger a/c. Basically it all depends upon the whether the particular ledger which we are preparing is being debited or credited in the journal entries.

2.If the particular ledger is being debited in the journal entry, than we will post the entry to the debit side of that particular ledger.

Important Points regarding Ledgers

1.Whenever we post any entry to the debit side of ledger we prefix TO.

2.Whenever we post any entry to the credit side of ledger we prefix BY.

3.The balancing figures of Personal a/c can ONLY be either To bal c/c or By bal c/d.

4.The balancing figures of Real a/c can be ONLY By bal c/d.

The nominal a/c are never balanced.
We transferred them to P/L a/c, except trading A/’s accounts. These are:

Purchase a/c, Sales a/c, Purchase return a/c, Sales return a/c and Stock a/c and all direct expenses– these accounts are transferred to TRADING A/C.

The rest of the Nominal accounts are transferred to P/L account, respectively.

The balancing figure of a nominal account which is transferred to Trading a/c can either be To Trading a/c or By Trading a/c.
The balancing figure of a nominal account which is transferred to P/L a/c can either be To P/L a/c or By P/L a/c.
Balancing a ledger is an important step in preparing a ledger.
The left-hand side of a ledger is a “debit” side and the right-hand side of a ledger is a “credit” side
Now first we sum up the debit side and then the credit side.
The bigger amount of the two sides is
Now we have to record these infinite transactions in the books of accounts, since these transactions are infinite, unlimited and different in nature, we face difficulties in recording them.
Before recording these transactions, we have to understand them, since their number is very large (infinite/unlimited), we face difficulties in their recording.
Is then written on both the sides as totals of both the sides.

DEBIT AND CREDIT BALANCE OF LEDGER

The deficiency on either side is the balancing figure of the ledger.
- The balancing figure is thus written according to the points mentioned in the earlier points.
- If the debit side total is bigger than the credit side total, then it is called a DEBIT BALANCE.
- If the credit side total is bigger than the credit side total than it is called a CREDIT BALANCE.
- If both the credit side total and the debit side total is equal by themselves, then we do not balance the ledger as it is already balanced and there is NO balancing figure.

What is format of Ledger ?

Format of ledger

Ledger account format

What are ledger and its example in accounting?

Personal A/c

In personal A/c either have debit balance or credit balance

Case 1: Credit balance ledger

Date	Particular	Amount	Date	Particular	Amount
Xxx	To —-	5	Xxx	By —-	10
	To bal. c/d	5
		10			10
				By Bal C/d	5

Example Debit balance ledger

Date	Particular	Amount	Date	Particular	Amount
Xxx	To —-	10	Xxx	To —-	5
				By bal. c/d	5
		10			10
	By bal. B/d	5

Real A/c Ledger

Note : Real A/c always have debit balance

Date	Particular	Amount	Date	Particular	Amount
Xxx	To —-	10	Xxx	By —-	5
				By Bal c/d A/c	5
		10			10

Nominal A/c

either have debit side or credit side balance .If its debit side balance its an expense or loss or it its a credit side balance its a Income or gain.

Date	Particular	Amount	Date	Particular	Amount
Xxx	To —-	5	Xxx	By —-	10
	To P/L a/c	5
		10			10

Date	Particular	Amount	Date	Particular	Amount
Xxx	To —-	5	Xxx	By —-	10
	To P/L a/c	5
		10			10

Trading a/c on ledger

Purchase A/c
Sales
Sales Return
Purchase Return
Wages , octroi, factory expenses etc( all direct expenses)

Date	Particular	Amount	Date	Particular	Amount
Xxx	To —-	10	Xxx	By —-	5
				By Trading A/c	5
		10			10

How to prepare ledger from journal entry .

Difference between Journal and Ledger in Accounting

Journal	Ledger
It relates to the book of accounts that record every business transaction in chronological order.	It relates to the book of accounts, which contains the entries classified based on affected account types, after being first posted into a general journal and then finally making its way into a general ledger.
It is the initial point of entry of any kind of business transaction to make it to the company’s book of accounts.	It is the assisted point of entry in accountancy for recording a transaction after it enters the accounting system through a general journal.
We recorded every entry based on chronological order.	We recorded every entry based on affected account types.
It supports the concept of duality, i.e., every transaction reported under the double-entry accounting practice.	It also supports the view of duality, i.e., every transaction recorded under the double entry accounting system.

What is Accounting and how to make its journal entry

17Oct, 2020

How to make journal entry in Accounting ?

What is Accounting ?

What is Accounting and how to make journal entry ?

What is accounting?

Accountancy is an ART of Recording, Classifying and Summarizing in a significant manner and in terms of money, financial transactions and events which are in part at least of a financial character and interpreting the result thereof.

“American Institute of Certified Public Accountant”

Fundamental Points of Accountancy.

In Accountancy “DEBIT” means ‘+’, ‘Addition’.
In Accountancy “CREDIT” means ‘-’, ‘Subtraction’.
In every transactions there is a ‘Receiver’ and there is a ‘Giver’.
In every transactions something comes IN the business and something goes OUT of the business.
In accountancy the ‘Transactions’ are recorded in the books of Accounts from the point of view of the BUSINESS only.
In Accountancy only Business transactions are recorded in the books of Accounts and the Personal transactions of the Owner are not recorded.
The amount which the owner invest into the business is known as CAPITAL
The amount which the owner withdraws from the business for his PERSONAL USE is known as DRAWINGS.

Non-economic activity is an activity performed with the purpose of rendering services to others without any consideration to financial gain. Example Mother cooking food for children.

In accounting we only record Economic activities only. Therefore economic activities are considered in accounting hence we divide them into three parts as shown below.

Division of activities in Acccouting

Types of activities

Economic Activities

Activities that involve money or the exchange of products or services are economic activities.

Business run for profit is example of economic activity.

Non – economic activities

Non-economic activity is an activity performed with the purpose of rendering services to others without any consideration to financial gain. Example Mother cooking food for children.

In accounting we only record Economic activities only. Therefore economic activities are considered in accounting hence we divide them into three parts as shown below.

PERSONAL ACCOUNTS

(Name)

REAL ACCOUNTS

(Feel and Touch)

NOMINAL ACCOUNTS

(All expenses losses gain and income)

RAM
SHYAM
SITA
GEETA
COMPANY
BANK A/C
Capital a/c
Drawing s a/c

LAND & BUILDING
PLANT & MACHINERY
FURNITURE & FIXTURES
CASH A/C

EXPENSES
INCOMES
PROFITS
LOSSES

Three golden Rules of Accounting

Three golden Rules of Accounting
Personal A/c	Debit (Dr.) The receiver Credit (Cr.) The Giver
Real A/c	Debit (Dr.) What comes In Credit (Cr.) What Goes out
Nominal A/c	Debit (Dr.)All expenses and Losses Credit (Cr.) All gains and Income

Application of how to make journal Entry

There are four (4) steps in the construction of a journal entry

1. Understanding the transaction.

2. Identifying the accounts to be opened.

3. Classifying the accounts as per the division of the economy.

4. Applying the rules

How to create a journal entry

How to make journal entry?

Before we go further, we understand that What is a Journal Entry?

What is Journal Entry ?

A Journal Entry is commonly a summary of the debits and credits of the transaction entry to the Journal. Journal entries are important because they give us to sort our transactions into manageable data.

A journal entry is used to register a business transaction in the accounting records of a business. We usually record a journal entry in the Journal , quickly, it may be recorded in a subsidiary ledger that is then summed up and rolled forward into the general ledger. The general ledger is then used to create financial statements for the organization.

Example of Journal entry

Date

Particular

Amount

Account Dr.

To Account

Xxxx

xxxx

Examples of journal entry.

while making journal entry as we know we have identify the account and apply golden rule .

Started business with cash Rs. 100,000.

Capital A/c (Personal)

Cash A/c (Real A/c)

Date

Particular

Amount

xxx

Cash A/c Dr.

100,000

To Capital A/c

( Being business started with the cash)

100,000

Deposited into bank Rs. 50,000.

Bank A/c (P)

Cash A/c (R)

Date

Particular

Amount

xxx

Bank A/c Dr.

To cash A/c

(being cash deposited into bank)

50,000

Purchase goods from Mohan Rs. 9000

(Note: when name is given in the transaction it means goods are purchased on credit from the party.)

Purchase A/c (Real A/c)

Mohan (Personal)

Date

Particular

Amount

Xxx

Purchase A/c Dr.

To Mohan A/c

(Being goods purchased from Mohan)

9,000

Sold goods for cash Rs 9000.

Sales A/c (Real a/c)

Cash A/c ( Real A/c)

Date

Particular

Amount

Xxx

Cash A/c Dr.

To Sales A/c

(being goods sold for cash)

9,000

5.Purchase goods by cheque Rs. 7000.

Purchase A/c (Real A/c)

Bank A/c (Personal a/c)

Date

Particular

Amount

Xxx

Purchase A/c Dr.

To Bank A/c

(being goods purchase by cheque)

7,000

6.Sold goods by cheque Rs 9000.

Sale A/c (Real a/c)

Bank (Personal A/c)

Date

Particular

Amount

xxx

Bank A/c Dr

To sales A/c

.being goods sold by cheque)

7,000

7.Sold goods from Ramesh Rs 3000.

Sale A/c (Real A/c)

Ramesh (Personal a/c)

Date

Particular

Amount

Xxx

Ramesh A/c Dr.

To sales A/c

(being goods purchase by cheque)

3,000

8..Purchase Machinery for cash Rs. 20,000.

Machinery A/c (real A/c)

Cash a/c (real A/c)

Date

Particular

Amount

xxx

Machinery A/c Dr.

TO Cash A/c.

(being machinery purchased)

20,000

9..Paid Rent Rs 8000.

Rent A/c (nominal A/c)

Cash A/c (real A/c)

Date

Particular

Amount

xxx

Rent A/c

To Cash A/c

(being rent paid)

8,000

10..Received Commission Rs 800 by cheque.

Cash A/c ( Real A/c)

Commission (Nominal A/c)

Date

Particular

Amount

xxx

Cash A/c

To commission

(being commission received)

800

Trade Discount and Cash Discount

Meaning

Trade Discount

A discount given by the seller to the buyer as a deduction in the list price of the commodity is trade discount.

Cash Discount

A deduction in the amount of invoice allowed by the seller to the buyer in return for immediate payment is cash discount.

Purpose

To facilitate a bulk sales.

To facilitate a prompt payment.

Invoice

It is shown in invoice as a deduction itself.

It is not shown in invoice.

When allowed?	Trade Discount At the time of purchase.	Cash Discount At the time of payment.
Allowed to all customers	Yes	No
Entry in books	No	Yes

Format of Bill or invoice under Trade Discount . Here trade discount is shown in the bill but not

S.NO

ITEM

PRICE

UNITS

TRADE

DISCOUNT

AMOUNT

1

X

100

!0%

9000

Total amount

9000/

Journal entry of trade discount Example:

Purchase goods from Mohan Rs 10,000 and trade discount received 10% .

10,000 X 10% = 1000

10,000 – 1000 = Rs 9000

Journal entry for the transaction will be

Date

Particular

Amount

Purchase A/c Dr.

To Mohan

( being goods purchased from Mohan)

9,000

2. Sold goods to Disha Rs 20,000 and trade discount allowed 10% .

20,000 X 10% = 2000

20000-2000= 18,000

Journal entry of transaction will be.

Date

Particular

Amount

xxx

Disha Dr. .

To Sales A/c

( being goods Sold to disha)

18,000

Journal entry of Cash discount .

Purchase Goods from Mahesh Rs 10,000

Purchase A/c (r)

Mahesh (P)

Purchase A/c 10,000

To Mahesh 10,000

(being goods purchased from Mahesh)

Paid cash to Mahesh Rs 9500 and received cash discount Rs 500.

cash discount is shown in the book of accounts.

Cash A/c (r )

Mahesh ( P)

Discount received ( N)

Date

Particular

Amount

xxx

Mahesh Dr.. .

To cash A/c

To discount received A/c

( being goods Sold to disha)

10,000

9,500

500

Sold goods to Varun Rs 20,000

Sale A/c (r)

Varun (p)

Varun Dr . 20,000

To sales A/c 20,000

(being goods sold to Varun)

Received cash from Varun Rs 19,500 and discount allowed 500

Cash A/c ( r)
Varun ( P)
discount Allowed (N)

Date

Particular

Amount

xxx

Cash A/c Dr.

Discount Allowed A/c Dr.

To Varun

(being cash paid to Varun and discount allowed)

19,500

500

20,000

Particular	Amount	Particular	Amount
To Cash	100,000
		By Bal. C/d	100,000
	100,000		100,000

Monthly Archives: October 2020

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

Final accounts Trading profit and loss and balance sheet in Accounting

Final accounts have three parts

What is Trading Account ?

Trading Accounts

Format of Trading Account for the year

Format of Profit and loss Accounts for the year ending

Format of balance sheet as on_____

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

Trading A/c for the year ending

Profit and Loss account for the year ending

Balance Sheet as on …….

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

Final Accounts with adjustment

Adjustment transactions

Outstanding Expense

Prepaid expense

Depreciation adjustment

Accrued Income

What are Ledger Account Definition, Format, Types, and Example ?

What is the meaning of Ledger accounts ?

what is ledger account with example

Ledger accounting definition

HOW TO DO POSTING IN LEDGERS

Important point while preparing Ledger

POINT TO BE NOTED

Important Points regarding Ledgers

DEBIT AND CREDIT BALANCE OF LEDGER

What is format of Ledger ?

Format of ledger

Ledger account format

Personal A/c

Real A/c Ledger

Nominal A/c

Trading a/c on ledger

How to prepare ledger from journal entry .

what are ledger and its example in accounting

Posting in ledger from Journal entries

Trial Balance

Difference between Journal and Ledger in Accounting

How to make journal entry in Accounting ?

What is Accounting ?

What is Accounting and how to make journal entry ?

What is accounting?

Fundamental Points of Accountancy.

Division of activities in Acccouting

Types of activities

Economic Activities

Non – economic activities

Three golden Rules of Accounting

Three golden Rules of Accounting

How to create a journal entry

How to make journal entry?​

What is Journal Entry ?

Examples of journal entry.

Trade Discount and Cash Discount

Trade Discount

Cash Discount

Trade Discount

Cash Discount

How to make journal entry?