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The following items usually appear in the debit and credit sides of the trading account.
To Opening stock To purchases Less Returns To Carriage inwards To Cartage To dock charges To Wages To Duty To Freight To Clearing charges To Etc. Etc., To Gross profit (Transferred to profit and loss account)
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By Sales Less returns ........ By Closing stock ......... By Gross loss ......... transferred to profit and loss account ......... ......... ......... ......... ......... .........
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Opening Stock:
In case of trading concerns it will consist of only finished goods or goods to be sold without alteration. In manufacturing concerns, the opening stock will consist of three parts (a). Stock of raw materials. (b). Stock of partly completed goods or work-in-progress. (c). Stock of finished goods. In case of new business there will be no opening stock.
Purchases:
This item includes both cash and credit purchases of goods bought with the object of sales.
Discount on Purchases:
Sales:
This item includes total of both cash and credit sales of goods in which businessman deals in. It is credited to trading account.
Discount on Sales:
This account has always a debit balance and is shown by deduction from sales in the trading account.
Direct Expenses:
Direct expenses are those expenses which are incurred to convert raw-materials into finished goods or which may be regarded as a part of the cost of purchasing the goods. e.g., wages paid by a manufacturer to construct furniture out of raw wood, the expenses incurred to bring goods from the place of purchase to the business place of the trader etc. All the direct expenses are charged to the trading account. The items usually included in the direct expenses are:
3.
4. 5. 6.