Page 134 - Account 10

Procedures of Preparing Trading Account

There are the procedures which are followed while preparing trading account.

1. A proper format should be drawn and name of company and the date should be
maintained at the top.
2. It is prepared in the form of ledger account and thus, it contains two sides; debit
and credit.
3. It is treated as nominal account and all the losses and expenses are debited and
all gains and incomes are credited.
4. The word ‘To’ is used in debit side and ‘By’ in credit side.
5. Opening stock and direct expenses are entered in debit side sales and closing
stock are entered in credit side.
6. The gross profit or gross loss should be determined by comparing the debit total
and credit total.
7. The balancing figure appearing in debit side is termed as gross profit under the
word “To gross profit c/d” and the balancing figure appearing in credit side is
termed as gross loss under the word “By gross loss c/d”.
8. After the determination of gross profit and gross loss, it should be closed by
drawing two parallel lines.

Illustration - 1
From the following information, prepare a Trading A/c of Suman Enterprises for the
year ended 30 Chaitra, 2075.
th
Particulars Amount Particulars Amount
Purchases 35,000 Carriage inward 2,000
Wages 5,000 Opening stock 12,000
Sales 65,000 Factory expenses 10,000

Purchase returns 2,500 Carriage insurance 500
Octroi charges 1,500 Coal & coke 700
Clearing charges 1,300 Sales returns 3,000

Power & fuel 1,800 Import duty 1,200
Closing stock was valued at Rs. 20,000

134 Aakar’s Office Practice and Accountancy - 10 Final Accounts 135