trading profit and loss account
TRANSCRIPT
Sreejith S Fims 2008
Income Statement
• Statement showing the revenues, expenses
• To know the Income generated in a period
• It depicts a business entity's financial performance due to operations as well as other activities
Sreejith S Fims 2008
Trading account
• First section of Income Statement
• Find out the Gross profit
Sreejith S Fims 2008
Gross Profit
• It is the profitability of the goods bought or manufactured, sold by the firm
• Sales – Cost of Goods sold
Sreejith S Fims 2008
Trading Account for the year ended 31st DecParticulars Amount Particulars Amount
To opening stockTo purchaseTo WagesTo Carriage inwardsTo Gross Profit
XxxxXxxxXxxXxxxxxxx
xxxxxx
By SalesBy Closing Stock
XxxXxx
xxxxx
By Gross profit xxxx
Sreejith S Fims 2008
Opening Stock
• remained unsold stock at the end of previous year.
• brought into books with the help of opening entry
• in the first year of a business there will be no opening stock
Sreejith S Fims 2008
Purchases
• total purchases i.e. cash plus credit purchases
• Any return outwards (purchases return) should be deducted out of purchases
Sreejith S Fims 2008
Buying Expenses
• All expenses relating to purchase of goods are also debited in the trading account
• carriage inwards freight, duty, clearing charges, excise duty, import duty, etc
Sreejith S Fims 2008
Manufacturing Expenses
• Such expenses are incurred by businessmen to manufacture or to render the goods in saleable condition
• motive power, gas fuel, stores, royalties, factory expenses, foreman and supervisor's salary etc.
Sreejith S Fims 2008
Sales.
• Sales mean total sales i.e. cash plus credit sales. If there are any sales returns, these should be deducted from sales.
Sreejith S Fims 2008
Closing Stock
• It is the value of stock lying unsold in the godown or shop on the last date of accounting period.
Sreejith S Fims 2008
Prepare a Trading Account
• Opening Stock 100000• Purchases 672000• Carriage Inwards 30000• Wages 50000• Sales 1100000• Returns inwards 100000• Return outwards 72000• Closing Stock 200000
Sreejith S Fims 2008
Profit and Loss Account
• To find out the Net profit
• Difference between Operating expenses and income
Sreejith S Fims 2008
Particulars Amount Particulars Amount
To salariesTo carriage outwardsTo Interest on loanTo Bad debtsTo AdvertisingTo Export DutyTo PackagesTo RentTo Commission PaidTo Depreciation
To net profit transferred to capital account
XxxxXxxxXxxXxxxxxxxxxxxxxxxxxxxxxxxxx
By Gross profitBy Discount receivedBy Commission receivedBy Rent receivedBy Interest receivedBy Income from investmentsBy Dividend received
XxxXxxxxxxxxxxxxxxxxxxxxxxx
xxxx xxxxx
Profit and Loss account for the year ended 31st march 2008
Sreejith S Fims 2008
Indirect Expenses
• Selling and distribution expenses
• Administrative Expenses
• Financial Expenses
• Maintenance, depreciations and Provisions etc.
Sreejith S Fims 2008
Selling and Distribution Exp
• a) Salesmen's salary and commission• (b) Commission to agents• (c) Freight & carriage on sales• (d) Sales tax• (e) Bad debts• (f) Advertising• (g) Packing expenses• (h) Export duty.. etc
Sreejith S Fims 2008
Administrative Expenses.
• (a) Office salaries & wages• (b) Insurance• (c) Legal expenses• (d) Trade expenses• (e) Rates & taxes• (f) Audit fees• (g) Insurance• (h) Rent• (i) Printing and stationery• (j) Postage and telegrams• (k) Bank charges… etc
Sreejith S Fims 2008
Financial Expenses
• (a) Discount allowed
• (b) Interest on Capital
• (c) Interest on loan
• (d) Discount Charges on bill discounted
Sreejith S Fims 2008
Maintenance, depreciations and Provisions etc
• (a) Repairs
• (b) Depreciation on assets
• (c) Provision or reserve for doubtful debts
• (d) Reserve for discount on debtors.
Sreejith S Fims 2008
Prepare a Profit and Loss Account• Salaries 110000
• Legal Charges 25000
• Consultancy fee 32000
• Audit Fee 1000
• Discount Received 18000
• Electricity 17000
• Gross profit 420000
• Postage & Telegram 12000
• Stationary 27000
• Depreciation 65000
• Discount Allowed 19000
• Bad debts 17000
• Interest 70000
Sreejith S Fims 2008
Particulars Debit Credit
Capital Opening StockCash MachineryPurchasesWages DiscountOffice ExpSalesSundry DebtorsSundry CreditorsSalary
Closing Stock Rs 2700
20001440736018200100005006000
8500
10000
64000
10000
300
50000
3700
64000
Trial Balance on 31st March 2008
Sreejith S Fims 2008
Particulars Debit Credit
Capital Purchase & SalesOpening StockDebtors and CreditorsBank LoanOverdraftSalariesAdvertisementOther ExpReturnsFurnitureBuildingCash
Closing Stock Rs 100000
6050007200090000
270000110000600004000045000089000050002592000
8700001210000
170000200000112000
2592000
Trial Balance on 31st March 2008