Page 151 - DCOM101_FINANCIAL_ACCOUNTING_I

Unit 12: Final Accounts

Carriage Inwards 10,000 Notes

Marine insurance on purchase 6,000
Other direct expenses 4,000
Sales Returns 30,000
st
Stock as on 31 March 2005 10,000
In this problem, return outwards and inwards are given in addition to cash and credit purchases
and sales of a fi rm to find out the net purchases and the net sales of the fi rm.

Net Sales = Cash Sales+ Credit Sales- Sales Returns
Net Purchases = Cash Purchases + Credit Purchases-Purchase Returns
Solution:

Trading account
for the year ended 31 March 2005
st
Dr ` ` Cr
To Opening Stock 50,000 By Cash Sales 40,000
To Cash Purchase 1,20,000 Add: Credit Sales 1,00,000
Add: Credit Purchase 1,00,000 By Total Sales 1,40,000
To Total Purchase 2,20,000 Less: Sales Return 30,000
Less: Purchase Return 20,000 By Net Sales 1,10,000
To Net Purchase 2,00,000 By Closing Stock 10,000
To Carriage Inwards 10,000 By Gross Loss c/d 1,50,000
To Marine Insurance 6,000
To Other Direct Expenses 4,000
2,70,000 2,70,000
To Gross Loss B/d 1,50,000
Gross Loss is due to an excess of the debit side total over the credit side total.

Task Calculate the Gross Profit from the following:

`
Opening stock 11,500
Purchases 1,05,000

Wages 3,500
Sales 1,40,000
Hint: ` 20,000

Profit & Loss Account

Profit & Loss Account is the second part of Trading and Profit & Loss Account. Trading Account

shows the gross profit which is the difference of sales and cost of sale. Thus the gross profi t can

not treated as net profit while the businessman wants to know how much net profit he has earned

from the operating activities during a period. For this purpose Profit & Loss Account is prepared
keeping in mind all the operating and non-operating incomes and losses of the business. In the
debit (left hand side) side all the expenses and losses are disclosed and in the credit side (right
hand side) all the incomes are disclosed. The excess of credit side over debit side is called net
LOVELY PROFESSIONAL UNIVERSITY 145