ppt on trading and profit and loss

1. Session Name:
Accounting: A Comprehensive
Overview
Delivered By:
Anshul Singhal

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4. By the end of this session, you will be able to:
Learning Objectives
o Final Accounts

5. • Final Accounts is the last step in the accounting process. Trial
Balance is prepared at the end of all the accounting year to know
the balances of all the accounts & to test the arithmetic accuracy of
accounts. But the basic objective of accounting is to know about the
profit or loss during the previous year & present financial position.
This can be known only if Trading account and Profit & Loss account
and Balance Sheet are prepared at the end pf year. These are also
known as FINANCIAL STSTEMENTS which are prepared
FINAL ACCOUNTS

6. FINAL ACCOUNTS
Business Transactions
Journal Entries
Ledger Accounts
Trial Balance
Final Accounts
Trading
Account
Profit & Loss
A/c
Balance
Sheet

8. Entry in the books of
Original Entry
(ORIGINAL RECORD)
Posting in the
concerned
Ledger account
(CLASSIFICATION)
Balancing of Real &
Personal accounts
Preparation of
Trial Balance
(CHECKING THE
ACCURACY)
Preparation of final
accounts
(summary)
ACCOUNTING CYCLE

10. FINAL ACCOUNTS

11. Key definitions
Business: An organization created
with the objective of making a profit
from the sale of goods or services.
Financial Transactions : Activity that
can be measure in monetary terms.
Calendar Year: An entity’s reporting
year, covering 12 months.
Revenues: Revenue is the money
that a company earns from selling
goods or services.
Expenses: Expenses are the costs that
a company incurs in order to make
that revenue.
Turnover: It means total trading
income from cash sales and credit
sales.
Key definitions
Accounting Terminology

12. Key definitions
Net worth: It means assets minus
outside liabilities. It denotes value of
business.
Balance sheet : An itemized
statement which lists the total assets
and the total liabilities of business.
Debtor: A debtor is a person who
owes money. The amount due from
his is called debt.
Creditor: A person to whom money is
owing or payable is called a creditor.
Liquidity: The availability of cash or
ability to obtain it quickly. Also used
to determine debt repayment ability.
Trial Balance: A listing of all account
balances that control whether total
debits equals total credits.
Key definitions
Accounting Terminology

13. Key definitions
Assets: Assets are things that a
company owns that have Future
Economic Benefits.
Liabilities: Liabilities are things that a
company owes to others.
Profit: Profit is what's left over after a
company subtracts its expenses from
its revenue..
Depreciation: Depreciation is when
an asset loses value over time. This
happen to Fixed assets.
Cash Flow: Cash flow is the
movement of money in and out of a
company.
Capital: Amount invested by the
owners of business.
Key definitions
Accounting Terminology

14. Trading Account
• Meaning:
• Trading Account is prepared to know profitability of business due to buying and selling or manufacturing and selling. It shows the profit from the
main business; buying and selling other than the business isn’t included in Trading Account.
• Trading Account is the first stage in preparing a final account. It shows the gross profit or gross loss during an accounting year.
• Its includes sales, services rendered in the credit side and cost of such sales and services rendered in the debit side.
• Features of Trading Account
• It is the first stage in preparation of final accounts.
• It records only net sales and direct cost of goods sold.
• The balance of this account discloses the gross profit or gross loss.
• The balance of this account is transferred to the Profit and Loss Account.

15. 01
Sales
Record total sales revenue
for the accounting period.
02
Direct Costs
Include all expenses
directly related to
production.
03
Gross Profit
Calculate by subtracting direct
costs from total sales.
04
Opening Stock
Start with inventory value at
the beginning of the period.
05
Closing Stock
Determine inventory value at
the end of the period.
06
Purchases
Document all purchases made
during the accounting period.
07
Cost of Goods Sold
Identify total costs incurred
for goods sold.
Components of the Trading Account

16. Description Amount Percentage Notes Adjustments
Revenue from Sales
Total revenue
generated
$100,000 100%
Main source of
income
None
Cost of Goods Sold Cost of goods sold $60,000 60% Direct costs incurred Less inventory
Operating Expenses
Operational
expenses
$20,000 20%
Fixed and variable
costs
Include overheads
Net Profit/Loss Final profit or loss $20,000 20% Profit after expenses Positive balance
Structure of Profit and Loss A/c

17. MCQs
Question 1:
The main purpose of a Trading Account is to:
A. Show net profit or loss
B. Show financial position
C. Ascertain gross profit or loss
D. Record non-operating incomes
Correct Answer: Ascertain gross profit or loss

18. MCQs
Question 2:
Which of the following is not shown in a Trading Account?
A. Opening Stock
B. Wages
C. Carriage Inwards
D. Interest on Loan
Correct Answer: Interest on Loan

19. MCQs
Question 3:
Gross Profit is calculated as:
A. Sales – Purchases
B. Sales + Opening Stock – Closing Stock
C. Sales – Cost of Goods Sold
D. Purchases – Direct Expenses
Correct Answer: Sales – Cost of Goods Sold

20. Happy
Learning

21. Session Summary
In this session, we have discussed about:
•
Note: this Slide is compulsory