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Questions
Answer in One Sentence:
What is a Trading A/c?
What is a Trading Account?
Solution
A trading account is an account created to determine gross profit/loss. This notional account serves as the first step of a trade organization's final accounts.
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From the following balances taken from the books of Victor, prepare trading account for the year ended December 31, 2017:
| Particulars | ₹ | Particulars | ₹ |
| Adjusted purchases | 80,000 | Closing stock | 7,000 |
| Sales | 90,000 | Carriage inwards | 3,000 |
| Royalty on purchases of goods | 4,000 | Import duty on purchases of goods | 6,000 |
| Octroi on purchase of goods | 2,000 | Dock charges on purchases | 5,000 |
| Cost of goods manufactured | 5,000 |
Find out the amount of sales from the following information:
| Particulars | ₹ | Particulars | ₹ |
| Opening stock | 30,000 | Closing stock | 20,000 |
| Purchases less returns | 2,00,000 | Gross profit margin (on sales) | 30% |
Wages, carriage inward are recorded on the ______ side of the ______.
Why is a Trading Account prepared?
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 |
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.
From the following Trial Balance of Mr. Rajesh, prepare final accounts for the year ended 31.3.2019:
| Debit (₹) | Credit (₹) | |
| Opening Stock | 19,000 | |
| Salaries | 10,500 | |
| Wages | 8,000 | |
| Railway Freight - Purchases & Imports | 2,500 | |
| General Office Expenses | 13,000 | |
| Annual Insurance | 2,000 | |
| Plant and Machinery | 50,000 | |
| Purchases and Sales | 1,20,000 | 2,53,000 |
| Rent | 7,500 | |
| Bad Debts and its Recoveries | 300 | 1,000 |
| Buildings and Sheds | 60,000 | |
| Bills Receivable and Payable | 12,200 | 4,000 |
| 10% Bank of Progress Loan | 50,000 | |
| Travel Costs | 15,000 | |
| Returns and Price Adjustments | 3,000 | 1,500 |
| Legal and Other Consultancy Fees | 10,000 | |
| Repairs | 8,600 | |
| Bank Account | 10,000 | |
| Capital and Drawings | 4,500 | 65,000 |
| Interest | 6,000 | |
| Debtors and Creditors | 35,000 | 22,600 |
| 3,97,100 | 3,97,100 |
Closing stock is valued at ₹ 45,000 (Its market price is only ₹ 40,000).
From the following Trial Balance of Mr. P.H. Planner as on 31.3.2019, prepare final accounts for him:
| Debit (₹) | Credit (₹) | |
| Duty, Clearing and Freight | 10,000 | |
| Stock (1.4.2018) | 30,000 | |
| Goodwill | 30,000 | |
| Salary, Bonus and Travel Allowance | 25,000 | |
| Leasehold Premises | 90,000 | |
| Purchases and Sales | 2,40,000 | 3,80,000 |
| Debtors and Creditors | 20,000 | 15,000 |
| Capital and Drawings | 20,000 | 1,60,000 |
| General Expenses | 16,000 | |
| Factory Equipment and Tools | 18,000 | |
| Bank | 5,000 | |
| Interest-free Loan from Mr. P.H. Planner for four years | 80,000 | |
| Wages and Bonus | 35,000 | |
| Cash and Petty Cash | 17,000 | |
| Plant and Machinery | 50,000 | |
| Bill Payable and Receivable | 12,000 | 8,000 |
| Professional Charges | 18,000 | |
| Returns | 7,000 | 4,000 |
| Insurance and Office Expenses | 14,000 | |
| 6,52,000 | 6,52,000 |
Closing Stock is ₹ 45,000.
The following Trial Balance was from the books of Ram as on 31st December 2018.
| TRIAL BALANCE | |||
| Dr. (₹) | Cr. (₹) | ||
| Drawings Account | 7,000 | Capital Account | 90,000 |
| Purchases | 82,210 | Purchase Return | 4,240 |
| Sales Return | 1,820 | Sales | 1,49,840 |
| Opening Stock | 11,460 | Bad Debt Reserve | 4,240 |
| Salaries | 6,280 | Discount | 180 |
| Wages | 8,560 | Sundry Creditors | 16,980 |
| Leasehold Premises | 25,000 | ||
| Rent, Rates & Insurance | 6,940 | ||
| Carriage Inward | 2,310 | ||
| Office Expenses | 9,520 | ||
| Plant & Machinery | 24,000 | ||
| Light & Water | 7,950 | ||
| Bills Receivable | 1,240 | ||
| Sundry Debtors | 38,970 | ||
| Cash at Bank | 12,400 | ||
| Cash in Hand | 2,210 | ||
| Office Furniture | 3,500 | ||
| Travelling Expenses | 9,870 | ||
| Bad Debts | 1,000 | ||
| Carriage Outward | 3,240 | ||
| 2,65,480 | 2,65,480 | ||
Prepare a Trading Account and a Profit & Loss Account for the year ended 31st December 2018 and a Balance Sheet as at that date.
The value of Stock on 31st December 2018 was ₹ 14 920.
Prepare Trading, Profit and Loss A/c and Balance Sheet of M/s Banerjee Enterprises for the Year ended 31st March, 2010 from the following Trial Balance.
| Heads of Accounts | (Dr.) (₹) | (Cr.) (₹) |
| Opening Stock | 25,000 | - |
| Purchases and Sales | 75,000 | 2,00,000 |
| Discounts | 3,600 | 6,000 |
| Debtors and Creditors | 32,000 | 15,000 |
| Bad debts | 400 | - |
| Cash-in-Hand | 3,000 | - |
| Machinery | 50,000 | - |
| Salaries | 8,000 | - |
| Carriage Inwards | 2,000 | - |
| Wages | 6,000 | - |
| Investments | 20,000 | - |
| Land and Building | 90,300 | - |
| Bank Overdraft | - | 20,000 |
| Commissions | 1,350 | 3,510 |
| Interest on Investments | - | 2,000 |
| Electricity | 2,000 | - |
| Rent | 2,500 | - |
| Insurance | 1,800 | - |
| Capital | - | 76,440 |
| 3,22,950 | 3,22,950 |
Closing stock was ₹ 10,360.
