trading account.pdf

8/9/2019 Trading Account.pdf

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Dr.N.KANNAN, Professor & Head in MBA Department. - 1 -

St.Mary’s School of Management Studies Jeppiaar Educational Trust

Chennai 600 119Department of Business Administration

MANAGEMENT ACCOUNTING

TRADING ACCOUNT for the year ending 31.3.XXXX

Dr. Cr.

Particulars Amount

Rs.

Particulars Amount

Rs.

To Opening StockTo Purchases

(Less) Return Outwards

To Direct Expenses

To Carriage Inward

To Wages & Salaries

To Freight

To Import duty

To Gas, Fuel & Water

To Royalty on production

To Gross Profit

By Sales(Less) Return inwards

By Loss on Fire

(Claimed insurance

amount)

By Closing Stock

By Gross Loss c\d


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PROFIT AND LOSS ACCOUNT for the year ending 31st MARCH XXXX

Dr. Cr.

Particulars Amount Particulars Amount

To Gross Loss b\d

To Office salaries and wages

To Office Rent, Rates and Taxes

To Office Lighting and Insurance

To Printing and Stationary

To Postage, Telegrams

To Legal Expenses

To trade expenses

To Audit fees

To Upkeep expenses of Motor Vans

To Repairs & Maintenance

To Export Expenses

To Telephone expensesTo General expenses

To cash discounts allowed

To Interest on capital

To Interest on loans

To Discount or Rebate on

Bill of Exchange

To Discount allowed

To Bad debts

To selling & Distribution Expenses

To Traveler’s Salaries

To packing charges of finished goodsTo Stores charges

To Bank charges

To carriage, freight, Cartage outwards

To cost of samples, Catalogue

Expenses

To salesmen’s salaries,

Expenses and commission

To Godown Rent

To Loss on Fire

To Carriage Outwards

To Agent’s CommissionTo Advertising expenses

To Depreciation on fixed assets

To loss on sale of fixed assets

To net profit (transferred to capital

account)

Rs.

By Gross Profit b\d

By cash discounts received

By Interest received

By Bad debts recovered

By Income from investments

By commission received

By Rent from tenants

By Interest on Debentures

By interest on deposits

By Accrued income of

Investments

By gain on sale of fixed assets

By apprenticeship premiumBy interest on drawings

By Net Loss (Transefered to

capital account)

Rs.


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Performa of a BALANCE SHEET as on March 31, XXXX

Liabilities Rs. Assets Rs.

Current Liabilities

Creditors

Bills payable

Bank overdraft

Outstanding expenses

Income received in advance

Fixed Liabilities

Loan

Mortgage

Capital(+) Net Profit

(+) Interest on Capital …………

(-) Drawings

(-) Interest on Drawings ………..

Rs.

Current Assets

Cash in hand

Cash at bank

Stock-in-trade

Debtors

Bills receivable

Prepaid expenses

Investments (give details)

Fixed Assets

Furniture and FixturesPlant and Machinery

Building

Land

Goodwill

Rs.


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DIFFERENCES BETWEEN TRIAL BALANCE AND BALANCE SHEET

Trial Balance Balance Sheet

1. It is a list of balances – debit and

credit-from the ledger accounts.

2.

It contains balances of all personal, real and nominal

accounts.

3. It is prepared before preparation

of trading and profit and loss

account

4. It is prepared to check the

arithmetical accuracy of posting

into ledger.

5.

Closing stock does not appear in

the trial balance.

6.

Outstanding and prepaid

expenses and incomes are not

shown.

7. Debit and credit balances are

shown side by side

1. It is a statement of assets and

liabilities

2.

It contains balances of onlythose personal and real

accounts, which represent

assets and liabilities.

3. It is prepared after the

preparation of trading and

profit and loss account.

4.

It is prepared to indicate the

financial position of the

business on particular date.

5. Closing stock is shown on the

assets side.

6. Outstanding and prepaid

expenses and incomes are

shown in the balance sheet.

7. Balance sheet is prepared on a

“T” form basis, the left hand

side showing liabilities while

right hand side representing

assets.

PROBLEMS:

1. Prepare Trading and Profit and Loss Account and balance Sheet from the following

balances, relating to the year ending 31st March 1998.

Rs. Rs.

Capital 10,000 Wages 5000

Creditors 1,200 Bank 1000

Returns Outward 500 Repairs 50

Sales 16,400 Stock (1-4-1997) 2000

Bills Payable 500 Rent 400

Plant and Machinery 4,000 Manufacturing Expenses 800

Sundry Debtors 2,400 Trade Expenses 700

Drawings 1,000 Bad Debts 200

Purchases 10,500 Carriage 150

Returns Inward 300 Fuel and Power 100

The closing Stock was valued at Rs. 1,450.

Depreciate Plant and Machinery by Rs. 400

Allow 5% interest on Capital

A sum of Rs. 40 is due for repairs


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2: From the following Trial Balance of Shri.R.Ranjan, prepare the Trading and P&L account

for the year ended 31st March 1998 and the Balance Sheet as at that date taking into account

the adjustments given below :

Dr. Cr.

R.Ranjan’s Capital 29000

R.Ranjan’s Drawings 760

Purchases and sales 8900 15000Sales and Purchases returns 280 450

Stock(1.4.1997) 1200

Wages 800

Building 22000

Freight and carriage 2000

Trade expenses 200

Advertisement 240

Interest 350

Taxes and Insurance 130

Debtors and Creditors 6500 1200

Bills receivable and bills payable 1500 700Cash at Bank 1200

Cash in hand 190

Salaries 800

Rs. 46700 46700

Adjustments:

(i) Stock on 31st March 1998 was valued at Rs.1500

(ii) Insurance was prepaid to the extent of Rs.40.

(iii) Outstanding liabilities were: Salaries Rs.200, Taxes Rs.130.

(iv)

Depreciate Building at 2% p.a.

3: From the following trial balance prepared from the books of A.Arthur on 31 st December

1997, prepare trading and P&L account for the year ending 31st December 1997 and a

balance sheet as on that date:

A. Arthur Drawings Rs. 10550 A. Arthur capital Rs. 1,19,400

Bills receivable 9500 Loan at 6% p.a. 20,000

Plant and machinery 28800 Sales 3,56,430

Sundry Debtors (including Commission received 5,640B.Madan for dishonoured Sundry creditors 59,630

Cheque- Rs.1000) 62000

Wages (Manufacturing) 40,970

Returns Inward 2780

Purchases 256590

Rent and taxes 5620

Stock on 1st Jan 1997 89680

Salaries 11000

Travelling Expenses 1880

Insurance 400

Cash 530


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Bank 18970

Repairs and renewals 3370

Interest on loan 1000

Interest and discount 4870

Bad Debts 3620

Fixtures and fittings 8970

Rs. 5,61,100 Rs. 5,61,000

The following adjustments are to be made

(a) Stock-in –trade in hand on December 31,1997 Rs. 1,28,960

(b) Write off half of B.Madan’s cheque

(c)

Create a provision of 5% on Sundry debtors

(d) Manufacturing wages include Rs.1,200 for erection of new machinery purchased

(e)

Depreciate plant and machinery by 5% p.a. and fixtures and fittings by 10% per

annum.

(f)

Commission not earned but received amounts to Rs.600.

4: From the following Trial Balance prepare a Trading and P & L account for the year

ended 31-12-95 and a balance sheet on that date:

Trial balance Dr. Cr.

Rs. Rs.

Capital 4,250

Drawings 710

Plant and Machinery 950

Stock on 1st Jan. 1,460

Purchases and Sales 10,362 11906

Purchases and Sales returns 210 291

General Expenses 440

Rent 120

Rates 200

Apprentice Premium 80

Bank Overdrafts 240

Bad Debts 172

Debtors and Creditors 4,200 2000

Cash on hand 48Bad Debts reserve 105

18,872 18,872

Make Provision for the following:

a) Depreciate Plant and Machinery at 10% p.a

b) Increase bad debts reserve to 5% on Sundry Debtors

c) Rent Accrued is Rs.40

d) Rates of Rs.80 are paid in advance

e) Stock on hand as on 31st December is Rs.1,700.

f)

Apprentice premium received in advance is Rs.20.


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5: You are required to prepare Trading and P& L account & Balance sheet from the

following:

Particulars Dr. (Rs.) Cr. (Rs.)

Purchases / Sales

Cash in hand

Cash in Bank

Stock as on 01.01.1997

Wages………………

Returns……………..

Repairs……………

Debtors/Creditors

Bad Debts

Loan (12% P.A)

DiscountsCapital

Interest on Loan………

Salaries

Sales Tax

Octroi

Insurance

Charity

Rent

Machinery

1,30,295

500

9500

40000

22525

2400

1675

30000

2310

800

600

8000

800

500

1000

125

2000

16000

2,69,030

1,80,500

195

30,305

20000

53037500

2,69,030

Adjustments:

i) Wages include Rs.2000 for erection of new machinery installed on 1.1.1997

ii) Provide for depreciation on machinery @ 5% P.A.

iii) Stock on 31.12.1997 is Rs. 40,925

iv) Salaries unpaid Rs.800.

v) Further Bad debts Rs.400

vi) Make a provision of 5% on Debtors

vii)

Rent is paid up to 31

st

March 1998.viii) Un expired insurance Rs.300.

6: From the following Trial balance and additional information pertaining to Mr.Balaji,

prepare Trading and Profit and Loss Account and balance Sheet.:

TRIAL BALANCE as on 31st March 1998

Rs. Rs.

Stock on 1.4.97 15,000 Sales 1,07,800

Purchases 62,400 Return Outwards 2,400

Wages 10,600 Sundry creditors 32,500

Carriage in 1,400 Outstanding wages 1,400


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Plant & Machinery 35,000 Capital 1,00,000

Coal, gas, water 2,500 Discount 1,800

Trade expenses 1,500 Bank Overdraft 20,000

Furniture 5000

Loose tools 3200

Depreciation on

Plant & Machinery 2000Salaries 4500

Bank charges 500

Sundry debtors 15,000

Factory premises 100000

Commission 1000

Sales returns 2,800

Drawings 3000

Insurance 500

2,65,900 2,65,900

Adjustments:-a) Stock on 31st March 1998 is valued at Rs. 3,00,000

b)

Interest on overdraft outstanding Rs.1000

c) Three months insurance paid in advance.

d) Loose tools are to be valued ar Rs.2000

e) Provide 10% depreciation on furniture and 5% on factory premises.

7: From the following Trial Balance of Mr.Santhosh as at 31st March 1998, prepare Finalstatements after making the necessary adjustments .Also give the closing and adjusting

entries. Debit Credit

Rs. Rs.

Santhosh’s Capital A/c 30000

Santhosh’s Drawings Ac 2,600

Plant & Machinery 12,000

Stock on 1.4.1997 5,000

Purchases 35,000

Sales 50,000

Returns inward 2000

Returns Outward 1000

Sundry debtors 8000

Sundry Creditors 6000Carriage inward 500

Carriage outward 500

Wages 3000

Salaries 2000

Factory Rent 200

Office Rent 500

Insurance 500

Discount received 600

Discount allowed 300

Furniture 2000

Bad Debts 400


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Commission 300

Building 8000

Bills Payable 2000

Bills receivable 6000

Cash on hand 200

Cash at bank 600

89,600 89,600Adjustments :

1) closing stock Rs. 20,000.

2) Prepaid insurance Rs.200

3) Outstanding wages Rs. 300; Salary Rs.200

4) Interest on capital 5%

5) Additional bad debts Rs.400.

6)

Reserve for bad debts at 5% and Reserve for discount on debtors at 5%

7) Reserve for discount on creditors at 2%

8)

Interest on drawings account at 6% for 6 months only.

9) Commission earned but not received Rs.200.

10)

Rent outstanding (office) Rs.400.11) Depreciation is to be provided at 10% on Furniture and Plant & machinery.

12)

Appreciation on Building at 10%.

FACULTY

(Dr.N.KANNAN)

trading account.pdf

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