Trading profit and loss account
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Trading profit and loss account
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Trading profit and loss account
- 1. Sreejith S Fims 2008 Trading Profit and Loss Account Sreejith S
- 2. Sreejith S Fims 2008 Income Statement • Statement showing the revenues, expenses • To know the Income generated in a period • It depicts a business entity's financial performance due to operations as well as other activities
- 3. Sreejith S Fims 2008 Income Statement • Trading Account • Profit and Loss account
- 4. Sreejith S Fims 2008 Trading account • First section of Income Statement • Find out the Gross profit
- 5. Sreejith S Fims 2008 Gross Profit • It is the profitability of the goods bought or manufactured, sold by the firm • Sales – Cost of Goods sold
- 6. Sreejith S Fims 2008 Cost of Goods Sold • Opening Stock + Purchases - Closing Stock
- 7. Sreejith S Fims 2008 Trading Account for the year ended 31st Dec Particulars Amount Particulars Amount To opening stock To purchase To Wages To Carriage inwards To Gross Profit Xxxx Xxxx Xxx Xxxx xxxx xxxxxx By Sales By Closing Stock Xxx Xxx xxxxx By Gross profit xxxx
- 8. Sreejith S Fims 2008 Opening Stock • remained unsold stock at the end of previous year. • brought into books with the help of opening entry • in the first year of a business there will be no opening stock
- 9. Sreejith S Fims 2008 Purchases • total purchases i.e. cash plus credit purchases • Any return outwards (purchases return) should be deducted out of purchases
- 10. Sreejith S Fims 2008 Buying Expenses • All expenses relating to purchase of goods are also debited in the trading account • carriage inwards freight, duty, clearing charges, excise duty, import duty, etc
- 11. Sreejith S Fims 2008 Manufacturing Expenses • Such expenses are incurred by businessmen to manufacture or to render the goods in saleable condition • motive power, gas fuel, stores, royalties, factory expenses, foreman and supervisor's salary etc.
- 12. Sreejith S Fims 2008 Sales. • Sales mean total sales i.e. cash plus credit sales. If there are any sales returns, these should be deducted from sales.
- 13. Sreejith S Fims 2008 Closing Stock • It is the value of stock lying unsold in the godown or shop on the last date of accounting period.
- 14. Sreejith S Fims 2008 Prepare a Trading Account • Opening Stock 100000 • Purchases 672000 • Carriage Inwards 30000 • Wages 50000 • Sales 1100000 • Returns inwards 100000 • Return outwards 72000 • Closing Stock 200000
- 15. Sreejith S Fims 2008 Profit and Loss Account • To find out the Net profit • Difference between Operating expenses and income
- 16. Sreejith S Fims 2008 Particulars Amount Particulars Amount To salaries To carriage outwards To Interest on loan To Bad debts To Advertising To Export Duty To Packages To Rent To Commission Paid To Depreciation To net profit transferred to capital account Xxxx Xxxx Xxx Xxxx xxxx xxxx xxxx xxx xxx xxxx By Gross profit By Discount received By Commission received By Rent received By Interest received By Income from investments By Dividend received Xxx Xxx xxx xxx xxx xxx xxx xxx xxx xxxx xxxxx Profit and Loss account for the year ended 31st march 2008
- 17. Sreejith S Fims 2008 Indirect Expenses • Selling and distribution expenses • Administrative Expenses • Financial Expenses • Maintenance, depreciations and Provisions etc.
- 18. Sreejith S Fims 2008 Selling and Distribution Exp • a) Salesmen's salary and commission • (b) Commission to agents • (c) Freight & carriage on sales • (d) Sales tax • (e) Bad debts • (f) Advertising • (g) Packing expenses • (h) Export duty.. etc
- 19. Sreejith S Fims 2008 Administrative Expenses. • (a) Office salaries & wages • (b) Insurance • (c) Legal expenses • (d) Trade expenses • (e) Rates & taxes • (f) Audit fees • (g) Insurance • (h) Rent • (i) Printing and stationery • (j) Postage and telegrams • (k) Bank charges… etc
- 20. Sreejith S Fims 2008 Financial Expenses • (a) Discount allowed • (b) Interest on Capital • (c) Interest on loan • (d) Discount Charges on bill discounted
- 21. Sreejith S Fims 2008 Maintenance, depreciations and Provisions etc • (a) Repairs • (b) Depreciation on assets • (c) Provision or reserve for doubtful debts • (d) Reserve for discount on debtors.
- 22. Sreejith S Fims 2008 Prepare a Profit and Loss Account • Salaries 110000 • Legal Charges 25000 • Consultancy fee 32000 • Audit Fee 1000 • Discount Received 18000 • Electricity 17000 • Gross profit 420000 • Postage & Telegram 12000 • Stationary 27000 • Depreciation 65000 • Discount Allowed 19000 • Bad debts 17000 • Interest 70000
- 23. Sreejith S Fims 2008 Particulars Debit Credit Capital Opening Stock Cash Machinery Purchases Wages Discount Office Exp Sales Sundry Debtors Sundry Creditors Salary Closing Stock Rs 2700 2000 1440 7360 18200 10000 500 6000 8500 10000 64000 10000 300 50000 3700 64000 Trial Balance on 31st March 2008
- 24. Sreejith S Fims 2008
- 25. Sreejith S Fims 2008 Particulars Debit Credit Capital Purchase & Sales Opening Stock Debtors and Creditors Bank Loan Overdraft Salaries Advertisement Other Exp Returns Furniture Building Cash Closing Stock Rs 100000 605000 72000 90000 270000 110000 60000 40000 450000 890000 5000 2592000 870000 1210000 170000 200000 112000 2592000 Trial Balance on 31st March 2008