2. Index
⬥ Introduction
⬥ Components
⬥ Trading Account
⬥ Profit and Loss Account
⬥ Balance Sheet
⬥ Practical Question
⬥ Working Note
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3. Final Account
⬥ Final accounts are various accounts and statements that
provides information related to progress of company
⬥ It is full and final accounting statement which is carried
out at the end of an accounting year.
⬥ It derives reference from the trial balance.
⬥ Balance Sheet, Profit and Loss Account, Trading
Accounts of any company at the end of financial year
are collectively known as Final Accounts. 3
4. Components of Final Account
⬥ Trading Account
⬥ Profit and Loss Account
⬥ Balance Sheet
4
5. Trading Account
⬥ This is the first account prepared to ascertain gross profit or gross
loss incurred during an accounting period.
⬥ This account records expenses which are related to manufacturing,
factory, production expenses.
⬥ It shows all debited sum such as purchase, opening stock and wages
and direct expenses on the left hand side(LHS).
⬥ On the credit side (Right hand side),when net sales are greater than
the values represented in LHF it shows gross profit.
RHS>LHS = Gross Profit
⬥ It provide Gross Loss when net sales are less than values
represented in LHF. LHS>RHS = Gross Loss
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7. Items on debit side of Trading Accounts
⬥ Opening Stock- It refers to the total cost of goods left unsold
at the beginning of current accounting year.
⬥ Purchases – Total cost of goods purchased both cash and
credit. In case of purchase return net purchases are recorded
in debit side after deducting from total purchase.
⬥ Wages- It includes the amount paid to workers for
manufacturing, loading, unloading of goods.
⬥ Custom and import duty- It refers to the amount paid as
custom and import duty when goods are imported.
⬥ Carriage expenses
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8. Profit and Loss Accounts
⬥ Profit and Loss account shows all income and indirect
expense related to business.
⬥ On debit side it has indirect expenses such as
administrative expenses, selling and distribution
expenses occurred during an accounting year.
⬥ On credit side it has all income received during an
accounting year.
⬥ Profit and Loss account represent net profit earned and
net loss suffered during the year.
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10. Balance Sheet
⬥ It is final statement that states the final
financial position of the company.
⬥ It enlists Assets on debit side and liabilities on
credit side.
⬥ Balance sheet is made at end of year on a
particular date.
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11. Format of Balance Sheet
Balance Sheet
As on _ _ _ _
11
Liabilities Amount Assets Amount
Capital
(-) Drawing
(+) Net Profit b/f
Reserve and Surplus
Bank overdraft
Creditors
Bank Loan
Bills payable
Outstanding
expenses
Total
Land and Building
Fixture and Furniture
Plant and Machinery
Debtors
Bill receivable
Cash at bank
Cash in hand
Prepaid expenses
Closing stock
Net Loss b/f
Total
12. From the following trail balance of Awasthi & Brothers prepare Trading, Profit and Loss Account and Balance Sheet
for the year ended June 30 th,2019
1. Depreciation on furniture by 10%.
2. A provision on doubtful debts is to be created to the extent of 5% on sundry debtors.
3. Insurance amounting Rs 2000 is prepaid.
4. Salary for the month of June, 2019 amounting Rs. 3000 were unpaid which must be provided for.
However, salaries included Rs. 2,000 paid in advance. Office expenses outstanding Rs. 8,000.
5. Stock for private use Rs 6,000 and Closing Stock Rs. 60,000. 12
13. Awasthi & Bro.
Trading account
for the year ended 30th,June 2019
13
Particulars Amount Particular Amount
Opening Stock
Purchases 15,0000
(-)Purchase return 5,000
(-) Drawing 6,000
Wages
Gross Profit c/d
Total
50,000
1,39,000
20,000
1,62,000
3,71,000
Sales 3,21,000
Sales Return 10,000
Closing Stock
Total
3,11,000
60,000
3,71,000
Dr. Cr.
14. Awasthi & Bro.
Profit & Loss account
for the year ended 30th, June 2019
14
Particulars Amount Particular Amount
Salaries 30,000
+Outstanding sal. 3,000
- Prepaid sal. (2,000)
Rent
Transportation out
Printing and Stationary
Insurance Exp. 12,000
-Prepaid 2,000
Office Exp. 12,000
+ Outstanding 8,000
Dep. on furniture
Provision for Bad debts
New 10,000
- Old 6,000
Net Profit c/f to b/s
Total
31,000
15,000
7,000
8,000
10,000
20,000
2,000
4,000
69,000
1,66000
Gross Profit b/d
Interest earned
Total
1,62,000
4,000
1,66,000
Dr. Cr.
15. Awasthi & Bro.
Balance Sheet
as on 30th, June 2019
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Liabilities Amount Assets Amount
Owner equity:
Capital 1,00,000
- Drawing 24,000
- Stock with drawl 6,000
70,000
+ Net Profit b/f 69,000
Current Liabilities:
Creditors
Bank overdrafts
Outstanding liabilities:
Salaries
Office expenses
1,39,000
1,20,000
2,000
3,000
8,000
Fixed and loan :
Furniture 20,000
- Dep. 2,000
Current Assets:
Debtors 2,00,000
Pro. for 10,000
d.debts
Cl. Stock
Prepaid expenses:
Salaries
Insurance
1,8000
1,90,000
60,000
2,000
2,000
Total 2,72000 Total 2,72,000
16. Working Note
■ Cr.
⬥ 1. Dep. A/c Dr 2,000
To Furniture A/c 2,000 (- from Furniture)
2. Provision on D. Debts Dr. 10,000
To Debtors A/c 10,000 (- from debtors.)
3. P & L A/c Dr. 11,000
To Outstanding Sal. 3,000 (Liab. In B/S)
To Outstanding Office Exp. 8,000 (Liab. In B/S)
4. Prepaid Exp. Dr. 4,000
To Salary 2,000 (Assets in B/S)
To Insurance 2,000 (Assets in B/s)
5. Drawing Dr. 6,000
To Capital A/c 6,000 (- from Capital)
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