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FINAL ACCOUNTS

TRADING ACCOUNT
PROFIT LOSS ACCOUNT

INCOME & EXPENDITURE ACCOUNT


BALANCE SHEET

TRADING ACCOUNT
THE PROFIT AND LOSS ACCOUNT OF A TRADING CONCERN IS USUALLY DIVIDED INTO TWO SECTIONS. THE FIRST IS TERMED THE TRADING ACCOUNT WHICH IS SO FRAMED AS TO SHOW THE GROSS PROFIT/LOSS. THE GROSS PROFIT/LOSS AS SHOWN BY THE TRADING ACCOUNT IS TRANSFERRED TO THE SECOND SECTION WHICH IS THE PROFIT AND LOSS

LAYOUT OF A TRADING ACCOUNT

DEBIT SIDE
OPENING STOCK

CREDIT SIDE
SALES

PURCHASES
GROSS LOSS

CLOSING STOCK
GROSS PROFIT

LAYOUT OF TRADING ACCOUNT


ON THE DEBIT SIDE : STOCK ON HAND AT THE COMMENCEMENT OF THE PERIOD. TOTAL PURCHASES MADE DURING THE PERIOD LESS VALUE OF RETURNS OUTWARDS. DIRECT CHANGES, i.e. SUCH EXPENSES THAT ADD DIRECTLY TO THE COST OF THE GOODS PURCHASED, SUCH AS FREIGHT, DUTY, CLEARING CHARGES, DOCK DUES, CARRIAGE INWARDS AND CARTAGE.

LAYOUT OF TRADING ACCOUNT


ON THE CREDIT SIDE : TOTAL SALES MADE DURING THE PERIOD, LESS THE VALUE OF SALES RETURNS. CLOSING STOCK ON HAND AT THE END OF THE PERIOD.

ADVANTAGE OF TRADING ACCOUNT


IT SHOWS THE GROSS RESULT ARISING FROM THE TRADE (BUYING AND SELLING OF GOODS) IT ENABLES A COMPARISON TO BE MADE OF THE PURCHASES, SALE AND STOCK OF ONE PERIOD WITH SIMILAR ITEMS OF THE PRECEDING PERIOD, AND THUS HELPS TO DETECT THE WEAK SPOT OF THE BUSINESS.

ADVANTAGE OF TRADING ACCOUNT (CONTD)


IT PROVIDES MEANS FOR THE ASCERTAINMENT OF THE RATIO OF GROSS PROFIT TO THE TURNOVER, IN ORDER TO FIND OUT HOW FAR THE ANTICIPATED RESULTS HAVE BEEN ACHIEVED. IT AFFORDS A CHECK ON THE PERCENTAGES WHICH THE DIRECT EXPENSES BEAR TO THE GROSS PROFIT.

PROFIT AND LOSS ACCOUNT


THE FUNCTION OF THE PROFIT AND LOSS ACCOUNT IS TO ENABLE ASCERTAINMENT OF THE NET PROFIT/LOSS RESULTING FROM THE BUSINESS TRANSACTIONS DURING A GIVEN PERIOD. THE GROSS PROFIT/LOSS SHOWN BY THE TRADING ACCOUNT IS TRANSFERRED TO THE CREDIT/DEBIT SIDE OF THE P & L ACCOUNT.

PROFIT AND LOSS ACCOUNT (CONTD)


THIS ACCOUNT IS CREDITED WITH ALL INCOMES SUCH AS INTEREST, COMMISSION, DISCOUNTS, DIVIDENDS, RENTS, REBATES, SUBSCRIPTIONS RECEIVED/RECEIVABLE. THIS ACCOUNT IS DEBITED WITH ALL EXPENSES SUCH AS SALARIES, INSURANCE, ADVERTISING, STATIONERY, COMMISSIONS, RENTS ETC PAID/PAYABLE.

INCOME AND EXPENDITURE ACCOUNT


THIS ACCOUNT IS AKIN TO THE PROFIT AND LOSS ACCOUNT. THIS ACCOUNT IS NORMALLY MADE IN RESPECT OF NON TRADING/CHARITABLE INSTITUTIONS. THE RESULT OF THIS I & E ACCOUNT IS CALLED INCOME OVER EXPENDITURE OR VISEVERSA AND NOT NET PROFIT/ LOSS AS IN THE CASE OF P & L ACCOUNT.

BALANCE SHEET
THE BALANCE SHEET IS A STATEMENT PREPARED WITH A VIEW TO DETERMINE THE EXACT FINANCIAL POSITION OF A BUSINESS ON A CERTAIN FIXED DATE. IT IS PREPARED FROM THE TRIAL BALANCE AFTER ALL THE BALANCES IN THE DIFFERENT LEDGER ACCOUNTS OTHER THAN THOSE PERTAINING TO ASSETS AND LIABILITIES ARE TRANSFERRED TO THE TRADING AND PROFIT AND LOSS ACCOUNT.

BALANCE SHEET (CONTD)


THE LEDGER ACCOUNT BALANCES PERTAINING TO ASSETS AND LIABILITIES ARE DIRECTLY TRANSFERRED TO THE BALANCE SHEET. ADJUSTMENTS NECESSARY FOR APPROPRIATION OF PROFIT, DEPRECIATION ARE CARRIED OUT BEFORE FINALISATION OF THE BALANCE SHEET.

BALANCE SHEET LAYOUT


LIABILITIES AMOUNT RS. ASSETS

AMOUNT RS.

SUNDRY CREDITORS UNPAID EXPENSES CAPITAL/ GEN FUND ADD NET PROFIT OR LESS NET LOSS

SUNDRY DEBTORS INVESTMENTS PREPAID EXPENSES FIXED ASSETS CLOSING STOCK CASH IN HAND CASH AT BANK