Page 148 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I

Notes 12.3 Trading and Profit & Loss Account

In the Trading and Profit & Loss Account all those accounts are disclosed which affect the profi t
or loss of the business. In other words, all the nominal accounts of the Trial Balance are used to

prepare the Trading and Profit & Loss Account. In the left hand side, all the expenses incurred
during a period and in the right hand side all the incomes earned during a period are disclosed.
This account contains two parts:
1. Trading Account

2. Profit & Loss Account
Trading Account

Trading account is the comparison of sales and purchase. This account is prepared to determine

the amount of gross profit or gross loss on sales. The proforma of Trading Account is given
below:
Proforma of Trading Account
In the Books of …………….
Trading Account
(for the year ending …………….)
Particulars Dr. Particulars Cr.
Amount (`) Amount (`)
To Opening Stock — By Sales —
To Purchases — Less: Returns — —
Less: Returns — — By Closing stock —
To Wages & Salaries — By Gross Loss (if any)
To Carriage Inwards — Transferred to P/L A/c —
To Cartage —
To Freight —
To Light Power & Heating in factory
To Factory Insurance —
To Works Manager’s Salary —
To Foreman’s Salary —
To Factory Rent & Taxes —
To Motive Power —
To Factory Repairs —
To Factory Expenses —
To Octroi duty —
To Custom Duty —
To Manufacturing Exps. —
To Consumable Stores —
To Gross Profi t —
Transferred to P/L A/c. —
— —

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