1.

Trading Account: -

Trading account shows gross profit or gross loss arising out of trading activities. Trade means buying and selling. The account mainly focuses on finding the result of goods bought and goods sold.

Trading Account
For the Year Ended Dr Particulars To opening stock To Purchases Less Purchase returns/returns outwards To Carriage inwards To freight and octroi To wages Add outstanding wages Less prepaid wages To fuel and power To Gas, coal, electricity for production To Import duty and clearing charges To stores consumed To factory rent, insurance, factory expenses To other direct expenses To Royalty paid To Gross Profit (Transf. Profit and Loss A/c ) Amt XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX Particular By sales Less returns inwards/sales returns By Closing stock By Gross Loss (Transf. Profit and Loss A/c ) Cr Amt XXX XXX XXX XXX

XXX Note: For every expenditure, outstanding and prepaid aspects must be considered.

Preparation of Trading Account

To prepare Trading Account, the following steps may be followed: a) Identify the items of expenses relating to trading and show them on the debit side of Trading Account. b) Effect the adjustments such as outstanding or prepaid to the relevant items of expenses c) Show the sales less returns and closing stock on the credit side of trading account

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d) The difference is gross profit if credit total is more than debit and gross loss if debit total is more than credit. e) Transfer the gross profit or gross los to Profit and Loss Account as the case may be.

2. Profit and Loss Account: -

is an important final account in the sense that the net result of the business in the form net profit or net loss is disclosed by preparing the same. All business expenses like administrative expenses, office expenses, selling and distribution expenses are shown on the debit side of the account.

Profit and Loss Account

For the Year Ended Dr Particulars To Trading Account (GL) To Salaries + Out standing Prepaid salaries as per adjustments To Rent of the premises To Travelling expenses To Rates and Taxes To Printing and stationery To Postage and Telegram To Telephone charges To Insurance Prepaid amount as per adjustment To Interest paid To Discount allowed To Sundry expenses To Advertisement To Commission To Carriage outwards To Bad Debts To Reserve for Bad debts To Reserve for discount on Debtors To Depreciation To Legal charges To Audit fee To Interest on Capital To Net Profit (transferred to P/L Appropriation A/c) Amt XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX Mr.Rupesh Dahake XXX Page 2 Particular By Trading account (GP) By Interest earned + Accrued interest as per adjustments By Commission earned By discount earned By Rent received By Bad debts recovered By Interest on drawings By Reserve for discount on Creditors By Dividends received By Royalty Received To Net Loss (transferred to P/L Appropriation A/c) Cr Amt XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

The following steps may help to prepare Profit and Loss Account
1. Identify the expenses and bring them to debit side of P&L Account 2. Identify the revenue incomes and put them on the credit side of P&L Account 3. Check whether all adjustments like outstanding, prepaid, pre received expenses and incomes as the case may be are brought to the account 4. Check the transfer of reserves to the relevant sides of the account 5. Transfer the net profit / net loss to the capital account

Profit and Loss Appropriation Account:Profit and Loss Appropriation Account

For the Year Ended Dr Particulars To Proposed Dividend To Transfer of General Reserve To Interim Dividend To Balance C/D (Transfer to Balance Sheet) Amt XXX XXX XXX XXX To Balance C/D (Transfer to Balance Sheet) XXX Particular By Previous Year Profit By Current Year Profit Cr Amt XXX XXX

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3.Balance Sheet

is the sum and substance of financial performance a business undertaking. Shows the assets and liabilities of business on a particular day. It is not an account but is a statement of affairs.

Balance Sheet
As On _______________________ Liabilities Capital: Authorized, Issued, Subscribed, Called up, Paid-Up capital with adjustments Reserves and Surplus Loans and Borrowings Long Term Loans Short Term Loans Current Liabilities: Sundry Creditors, B/P, Outstanding expenses, prereceived incomes, dividends payable, etc., Amt XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX Assets Fixed Assets: Goodwill, Land Buildings, Furniture, Fixtures, Equipment, Plant, Machinery, Copy Rights, Patents Investments Loans and Advances Current Assets: Debtors, B/R, Inventory, Cash, Bank, Outstanding incomes, Prepaid expenses etc Amt XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

XXX

A few guide lines are given here under to prepare balance Sheet of a business concern. Balance Sheet is not an account and there is nothing like debit side and credit side. If Trial Balance tallies, naturally Balance Sheet also tallies:
1. Identify all assets from the trial balance. Assets are shown on the debit side of T.B 2. Identify all liabilities from the Trial Balance and they are on the credit side of TB. 3. Make a mark of items with respect to which adjustments are given outside the TB 4. All adjustments should find place in two places, one either in Trading account or in Profit and Loss Account and another invariably Balance Sheet. For example, closing Stock given outside TB is first shown on the credit side of Trading Account and it is shown as an asset in

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