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.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

    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  
     4,49,000 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
    B/P6,200  
        
     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

    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
    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 AmountParticularAmount
      

    By income 20,000

     + accrued income 4,00

    		24,000
        
        

    Balance sheet as on

    LiabilitiesAmountAssetAmount
      Accrued Income4,00
        
        

    Unearned Income

    ParticularAmountAmount
    Rent 28,000
       
       

    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
    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 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