Page 91 - Office Practice and Accounting 10

5. All manufacturing expenses: All direct expenses that are incurred during the
production of goods such as octroi, import duty, excise duty, consumable goods,
motive power, coal, gas and water, factory expenses, dock charges, royalty, etc.

Items to be credited to trading account
1. Sales: Sales are the main source of revenue of business. Both cash and credit
sales should be recorded as revenue. It refers to the sales of those things/goods
which have been bought for resale purpose. It implies that sales of assets are not
treated to trading account. Sales returns or returns inwards, should be deducted
from the total sales as amount of net sale should be recorded.
2. Closings stock: Closing stock is the value of unsold goods at the end of current
period. In manufacturing company, three types of goods may remain as closing
stock :
i. closing stock of raw materials
ii. closing stock of work–in–progress and
iii. closing stock of finished goods.
Closing stock is treated to the credit side of the trading account.

Specimen of Trading Account

Trading A/C

.................. Co. Ltd.
For the year ending ............
Dr. Cr.

Particulars Amount Particulars Amount
To opening stock: By Sales: xxx
raw materials xxx less: return inwards xxx
work-in-progress xxx By Closing stock: xxx
finished goods xxx xxx
To purchases raw material xxx
less: return outwards xxx work-in-progress xxx
less: drawing in goods xxx finished goods xxx xxx
less: free sample xxx xxx By goods lost xxx
To carriage inwards xxx By gross loss c/d xxx
To duty and clearing charges xxx
To wages xxx
To power, fuel and lighting xxx
To store consumed xxx
To factory rent and insurance xxx
To royalties for production xxx
To Factory expenses xxx
To other manufacturing expenses xxx
To gross profit c/d xxx
Total xxx Total xxx

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