Page 139 - Account 10

6. Prepare a trading account of Avash Company at the end of Ashadh, 2061
according to the following transactions. (Board)

Particulars Amount Particulars Amount
Opening Stock 12,000 Purchase return 2,500
Factory rent 5,000 Sales return 2,200
Carriage 2,000 Sales 82,500
Wages 22,500 Purchase 35,000
Closing stock 20,000 Clearing charges 2,000
(Ans: GP Rs 24,300)
7. Prepare a Trading Account of Baba Biscuit Industry Pvt. Ltd. for the fiscal
year 2061/062 of Ashadh, from the following transactions. (2062R)

Particulars Amount Particulars Amount
Stock on 1 Shrawan 2,25,000 Sales Return 16,000
st
Purchase 7,80,000 Wages 1,40,000
Sales 9,50,000 Octroi 23,000
Fuel 1,32,000 Closing stock 3,00,000
Carriage Inward 90,000
(Ans: G.L. Rs. 1,56,000)

Profit and Loss A/c

6. Introduction
Profit and Loss A/c is the second step of final accounts. It is prepared after preparing
the trading A/c by transferring gross profit from the trading A/c on its credit side or
gross loss on its debit side. After the result of the trading A/c is entered, it enters all the
office and administrative and selling and distribution expenses and losses on the debit
side and indirect incomes, gains and profits on the credit side in order to determine the
net profit/loss for the year. Thus, a profit and loss A/c may be defined as the second step
of final accounts which is prepared to ascertain the net profit/loss of a business concern
for each accounting year, resulting from indirect incomes plus gains and expenses plus
losses of the year. It enters all such expenses and losses on the debit side and the incomes
and gains on the credit side. Thus, the difference between the total of its debit side and
credit side is either net profit or net loss. It means when the totals of its credit side i.e. the
total of incomes, gains and profits is heavier than the total of its debit side i.e. the total
of expenses and losses, it results net profit. Otherwise, when the debit total exceeds the
credit total, it results net loss.
According to S. Mukherjee, “Profit and loss account is a statement which summarises all
indirect revenue expenses in one side which is compared with gross profit revenue incomes in
another side and trading income of an accounting period is assessed.”
The net profit ascertained by profit and loss A/c is the taxable income of that concern
for the year. It is prepared, on one hand to facilitate the tax determination and on
the other, for finding out the general efficiency of a business concern in its normal
business operation.

138 Aakar’s Office Practice and Accountancy - 10 Final Accounts 139