Final accounts Trading profit and loss and balance sheet in Accounting

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