Page 21 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes

Notes
1. There is no particular proforma of the Trading Account. The above proforma given
is traditional one. That is not as per law. Here the students are advised to follow this
proforma.
2. If the total of credit side is more than the total of debit side, difference is called gross
profit or vice versa gross loss.

Task Calculate the Gross Profi t from the following:

`
Opening stock 11,500
Purchases 1,05,000
Wages 3,500
Sales 1,40,000
Hint: ` 20,000

Profit & Loss Account
It is a second statement of accounting in connection with the earlier to determine the net profi t/
loss of the enterprise out of the early found gross profit/loss. This is an accounting statement

which matches the administrative, selling and distribution expenses with the gross profi t and
other incomes of the enterprise.

This is an account prepared for one operating cycle of the firm, i.e. 12 months in period. The

transactions are recorded in accordance with golden rules of nominal account. In the profit & loss
account, the expenses and losses are debited and incomes and gains are credited. The reason for
bringing down the gross loss/gross profit of the trading account into the debit and credit side of

Profit & Loss A/c respectively, are only to the tune of nominal accounting ruling with reference
to debit all expenses and losses, and credit all incomes and gains.

The expenses that are matched with the credit total of the profit and loss account classifi ed into
various categories:
1. Administrative Expenses

2. Selling & Distribution Expenses
3. Financial Expenses
4. Legal Expense.

Did u know? What are the capital and revenue receipts?
The receipts which do not arise out of normal course of business are known as Capital
Receipts. For example, receipts from sale of fi xed assets.

16 LOVELY PROFESSIONAL UNIVERSITY