Amity Business School

Final Accounts of a Company

A company needs to prepare its final accounts to
ascertain the profit earned or loss suffered during
the year and also the financial position of a business
at the end of the year. For this purpose the companies
prepare Final Accounts which is also known as
Financial Statements. These include the following:
Trading Account
Profit and loss Account
Balance Sheet

Amity Business School

Final Accounts of a Company

Trading Account: Trading Account is prepared
to know the gross profit or gross loss arising or
incurred as a result of the trading activities of a
business. In other words, it is prepared to show
the result of buying and selling of goods during
an accounting period.
Trading account is a flow statement

Amity Business School

Format of Trading Account

Trading Account
(For the year ending..)
Dr.
Particulars

Amount
(Rs)

Particulars

Cr.
Amount(
Rs)

Amity Business School

Preparation of Trading Account

Items written on the Dr. Side of Trading Account:
Opening Stock
Purchases and Purchases Return
Direct Expenses - which includes Wages, Carriage
inwards, Manufacturing expenses, Dock Charges,
Import Duty, Excise Duty, Octroi, Royalty
Items written on the Cr. Side of Trading Account:
Sales and Sales Return
Closing Stock

Trading A/c
(For the year ending..) Amity Business School
Dr
Cr
Particulars
Amount
Particulars
Amount

To Opening Stock

By Sales

To Purchases

Less: Sales Return

Less Purchase Return

By Closing Stock

To wages

By Gross Loss

To Wages & Salaries

(Transferred to P&L A/c)

To Direct Expenses

(Balancing Figure)

To Carriage inwards

To Gas, Fuel, and Power

To Freight, Octroi and Cartage

To Manufacturing Expenses

To Factory Expenses

To Dock Charges

To Import Duty

To Excise Duty

To Royalty

To Gross Profit

(Transferred to P&L A/c)

(Balancing Figure)

Amity Business School

Prepare a Trading Account for the year ended 31 Dec 2009

from the following Balances:
Opening Stock
40, 000
Purchases
2, 00, 000
Sales
5, 00, 000
Freight and octroi
6, 500
Wages
30, 000
Factory Lighting
10, 800
Coal, Gas and Water
2, 200
Purchase Return
12, 000
Sales Return
20, 000
Carriage on Purchase
8, 000
Factory Rent
12, 000
Office Rent
7, 500
Closing Stock is valued at Rs. 60, 000

Amity Business School

PROFIT AND LOSS ACCOUNT

Profit and loss account is prepared to calculate the net
profit or net loss of the business for a given period.
A Profit & Loss Account is an account into which all
gains and losses are collected, in order to ascertain the
excess of gains over the losses or vice versa
Prof.
Carter

Amity Business School

PROFIT AND LOSS ACCOUNT

Items written on the Dr. Side of Profit and Loss Account:
Gross Loss
Office and Administrative Expenses
Selling and Distribution Expenses
Miscellaneous Expenses
Items written on the Cr. Side of Profit and Loss Account:
Gross Profit
Other Incomes and Gains

Profit and loss A/c

(For the year ending..)
Particulars
Amount
Particulars
Amount
Amity Business
School

To Gross Loss b/d

By Gross Profit b/d

(Transferred from Trading A/c)

(Transferred from Trading A/c)

To Salaries

By Rent from Tenants

To Salaries and Wages

By Discount Received

To Rent, Rates & Taxes

By Commission Received

To Printing and Stationery

By interest on Investment

To Postage & Telegram

By Dividend Received

To Lighting

By Bad-Debts Recovered

To Insurance Premium

By profit on sale of assets

To Telephone Charges

By Net Loss (if any)

To Bad-Debts

(Transfd to Capital A/c)

To Legal Charges, Audit Fees

To Travelling, Establishment Exp

To Interest Exp

To Carriage Outwards

To Advertisement, commission

To Brokerage,

TO Export Duty, Packing Charges

To depreciation

To Discount, Sales tax

To Repairs,
To Bank Charges, Entertainment Exp
To Conveyance Expenses
To Net Profit (Trnsfd to Capital A/c)

Amity Business School

Prepare a Profit and Loss A/c for the year ended 31st Mar, 2010 from
the following information:
Gross profit
5,00,000
Commission Allowed
2,000
Salaries and wages 10,000 Commission Received 3,000
Wages and salaries 1,000 Interest Allowed
3,000
Carriage Inwards
2,000 Interest Received
4,000
Carriage Outwards 5,000 Rent paid
4,000
Freight Inward
3,000 Rent Received
5,000
Freight outwards
5,000 Apprenticeship Premium Received
5,000
Discount Allowed
1,000 Apprenticeship Premium Paid
6,000
Discount Received 2,000 General Expenses

Amity Business School

BALANCE SHEET

A Balance sheet is a statement of assets and liabilities of an

enterprise at a given date.

Balance Sheet is a statement prepared with a view to measure

the exact financial position of a business on a certain fixed date
J. R. Batliboi
A Balance sheet is only a statement. It has no debit or credit
side. The headings are Assets and Liabilities.
A Balance sheet is prepared at a particular point of time and not
for a particular period.

BALANCE SHEET
(as at..)
Liabilities
Capital:
Share Capital
Add : Interest on capital
Less : Drawings
Reserves and Surplus
Capital reserve
Other Reserves
Profit and loss account (Cr Balance)
Secured Loans

Amount

Unsecured loans
Current Liabilities and Provisions:
Sundry Creditors
Bills Payable
Bank Overdraft
Outstanding Expenses
Unearned income
Provision for taxation
Other Provisions

Amity Business
School
Assets
Amount
Fixed Assets
a) Goodwill
b) Land
c) Building
d) Plant and Machinery

e) Furniture and Fixtures

f) Property
g) Premises
h) Patents/ copyright/trademark
i) Livestock
Less depreciation
Investments

Current Assets & Loans and

advances

Cash in Hand

Cash at Bank

Sundry Debtors
Closing Stock

Accrued Income

Loans and advances

Bills Receivable

Prepaid Expenses

Miscellaneous Expenses (to

the extent not written off)

Amity Business School

BALANCE SHEET
From the Following balances of Rajesh, prepare a Balance Sheet as on
31st December, 2009
Dr.
Cr.
Plant and Machinery
80, 000
Land and Building
60, 000
Furniture
15, 000
Cash in hand
2, 000
Bank Overdraft
18, 000
Debtors and Creditors 32, 000
24, 000
Bills Receivable and Payable
10, 000
6, 000
Closing Stock
40, 000
Investment (Short-term)
8, 000
Capital
1, 50, 000
Drawings
13, 000
Net Profit
62, 000