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प्रश्न
Explain the nature of a Trading Account.
What is the nature of Trading Account?
उत्तर
Following are the features of a Trading account:
- It is a nominal account.
- On the final day of the accounting year, it is prepared.
- It stands for the first stage of a trader's final accounts and the next stage of a manufacturer's final accounts.
- It only includes revenue-generating items. Not a single capital item if it's included.
- The opening stock balance is present for a trader. In the case of a manufacturer, it begins with the balance of the manufacturing account.
- It only includes items related to the current year.
Notes
Students should refer to the answer according to their questions.
संबंधित प्रश्न
What are the objectives of preparing trading account?
Closing stock appears in the Final Accounts in the ______.
It is an account prepared to ascertain the gross profit/loss. It is a nominal account and represents the first stage of final accounts of a trading organisation.
Sales are recorded on the ______ side of the ______.
From the following balances of Mr. Kumar, prepare final accounts for the year 2018:
| Debit Balance | (₹) | Credit Balance | (₹) |
| Salaries | 400 | Sales | 7,819 |
| Advertising | 42 | Carriage inwards | 9 |
| Postage and Telegrams | 27 | Capital | 3,600 |
| Bad Debts | 28 | Creditors | 1,124 |
| Interest | 130 | Loan | 1,200 |
| Discount (Dr.) | 100 | Debtors | 388 |
| wages | 430 | Fixtures and Fittings | 1,616 |
| Opening Stock | 995 | Buildings | 2,378 |
| Purchases | 6,200 | Machinery | 1,000 |
| Closing Stock | 1,430 |
Mr. P.H. Mehta is in business. The following balances were extracted from the books as on 31.12.2018. You are required to prepare the Trading Account and the Profit and Loss Account for the year ended 31.12.2018 and the Balance Sheet as on that date.
| Debit (₹) | Credit (₹) | |
| Capital | 1,98,000 | |
| Drawings | 10,000 | |
| Purchases and Returns Outward | 1,18,800 | 500 |
| Salaries | 21,650 | |
| Rate and Taxes | 950 | |
| Office Lighting and Cooling | 2,700 | |
| Import Duty | 2,200 | |
| Insurance | 250 | |
| Agency Commission | 900 | |
| Advertising | 5,000 | |
| Returns Inward and Sales | 3,48,500 | |
| Bad Debts | 800 | |
| Postage and Telegrams | 800 | |
| Discount Received | 150 | |
| Carriage for Door Delivery to Customers | 1,400 | |
| Opening Stock | 6,200 | |
| Wages | 27,700 | |
| Plant and Machinery | 2,05,000 | |
| Land and Buildings | 1,10,000 | |
| Furniture and Fittings | 3,000 | |
| Sundry Debtors and Creditors | 39,600 | 20,000 |
| Cash at Bank | 10,000 | |
| Petty Cash Balance | 200 | |
| 5,67,150 | 5,67,150 |
Closing stock on 31.12.2018 was ₹ 48,700.
The following is the trial balance of Mr. J. Jehangir as on 31st March, 2018.
| Dr. (₹) | Cr. (₹) | |
| Stock as on 1.4.18 | 25,000 | |
| Rates and Insurance | 11,900 | |
| Factory Power & Fuel | 16,000 | |
| Machineries | 1,00,000 | |
| Loose Tools | 10,000 | |
| Commission Earnings | 2,000 | |
| Discounts Received and Allowed | 6,000 | 5,000 |
| Personal Accounts of Suppliers & Customers | 48,000 | 20,000 |
| Salaries | 25,500 | |
| Wages | 13,000 | |
| Returns (of goods traded in) | 5,000 | 3,000 |
| Carriage Inward | 2,000 | |
| Carriage Outward | 5,000 | |
| Rent | 8,300 | |
| Purchases & Sales | 1,40,000 | 2,55,000 |
| Bad Debts Finalised & Recovered | 2,000 | 200 |
| Bills Receivable & Payable | 6,000 | 3,000 |
| Investments | 80,000 | |
| Income from Above Investments | 5,000 | |
| Bank Balances | 20,000 | 10,000 |
| Cash in Hand | 500 | |
| Capital & Drawings | 15,000 | 2,36,000 |
| 5,39,200 | 5,39,200 |
Compile the final accounts for the owner.
An inventory of the godown on 31.3.2018, reflected unsold stock valued ₹ 50,000.
Trial Balance of Mr. J. Junior as on 31.3.2019:
| Debit (₹) | Credit (₹) | |
| Factory Power | 16,000 | |
| Carriage Charges | 2,500 | |
| Salaries | 20,400 | |
| Sales & Purchases of Goods | 1,40,000 | 2,67,000 |
| Machinery | 1,20,000 | |
| Discounts Received and Allowed | 5,000 | 6,000 |
| Wages (manufacturing activity) | 18,000 | |
| Stock | 25,000 | |
| Commission | 3,800 | |
| Insurance | 8,000 | |
| Loose Tools (Fixed Asset) | 11,000 | |
| Returns of Goods | 5,000 | 6,000 |
| Debtors & Creditors | 45,000 | 18,000 |
| Carriage on Sales | 6,000 | |
| Rent & Rates | 10,800 | |
| Bad Debts Written off & Recovered | 2,000 | 1,600 |
| Investments | 80,000 | |
| Bank Accounts | 22,000 | 10,000 |
| Drawings & Capital | 15,000 | 2,37,000 |
| Bills Payable & Receivable | 6,000 | 4,000 |
| Income from Investments | 6,800 | |
| Cash | 2,500 | |
| 5,60,200 | 5,60,200 |
Compile Final Accounts:
- An inventory of the godown on 31.3.2019 reflected stock value stated as ₹ 50,000.
The following balances were extracted from the books of Sri S. Kumar on 31st December 2018.
| Dr. (₹) | Cr. (₹) | |
| Capital | 24,500 | |
| Drawings | 2,000 | |
| General Expenses | 2,500 | |
| Building | 11,000 | |
| Machinery | 9,340 | |
| Opening Stock | 16,200 | |
| Power | 2,240 | |
| Taxes & Insurance | 1,315 | |
| Wages | 7,200 | |
| Sundry Debtors | 6,280 | |
| Sundry Creditors | 2,500 | |
| Charity | 105 | |
| Bad Debts | 550 | |
| Bank Overdraft | 11,180 | |
| Sales | 65,360 | |
| Purchases | 47,000 | |
| Scooter | 2,000 | |
| Bad Debt Provision | 900 | |
| Commission | 1,320 | |
| Trade Expenses | 1,780 | |
| Bills Payable | 3,850 | |
| Cash | 100 | |
| 1,09,610 | 1,09,610 |
Stock on 31st December 2018 was valued at ₹ 23,500.
Prepare Final Accounts for the year ended 31st December 2018.
From the following trial balance of Mr. A prepare a Trading Account and a Profit and Loss Ale for the year ending 3tst Dec., 2018 and a Balance Sheet as on that date:
| TRIAL BALANCE | |||
| Debit Balance | (₹) | Credit Balance | (₹) |
| Cash | 10,000 | Sales | 1,80,500 |
| Stock | 40,800 | Returns | 195 |
| Wages | 22,525 | Loan | 20,000 |
| Ourchases | 1,30,295 | Creditors | 30,305 |
| Returns Inward | 2,400 | Discount | 530 |
| Repairs | 1,675 | Capital | 37,500 |
| Bad Debts | 2,310 | ||
| Interest on Loan | 600 | ||
| Salaries | 8,000 | ||
| Sales Tax | 800 | ||
| Octroi | 500 | ||
| Insurance | 1,000 | ||
| Charity | 125 | ||
| Rent | 2,000 | ||
| Machinery | 16,000 | ||
| Debtors | 30,000 | ||
| 2,69,030 | 2,69,030 | ||
Stock on 31st Dec., 2018 was ₹ 40,925.
