Business and Profit and Loss Account

Trading Account

As previously discussed, the first part of the business and profit and loss account is called a current account. The goal of preparing a current account is to find out profit or loss of total income, but in the latter part there is a profit or loss.

Account Preparation

Trading account is primarily prepared to know their profitability The products purchased (or manufactured) sold by a businessman. The difference between the selling price and the cost of sold products is the acquisition of a businessman. In order to calculate the gross service it is necessary to know:

(a) the cost of sold products.

(b) sale.

The total cost can be made for a sales group. However, the cost of sold products is calculated. In order to calculate the cost of sales, it is necessary to know its meaning. "Cost of goods" includes the purchase price of the product, as well as fees for the purchase of goods and incineration of the product to the establishment. In order to calculate the cost of the product, "we should deduct the total cost of goods that are purchased at a price. We can investigate this phenomenon with the help of the following formula:

Opening Cost + Cost of Purchase – Closing Stock = Sales Cost

Like It has previously been discussed that the purpose of preparing a current account is to calculate the total income of the company. This can be expressed as "Sales over" Sales Cost. This definition can be explained in terms of the following equation:

Gross Revenue = Sales-Cost We Sell Items or (Sales + Final Price) – (Origin At + Purchase + Direct Cost)

Opening and Purchase Purchases and Settlement Costs (Direct Allocation) are charged on the debit page but the sale and closing of inventory is listed on the credit market. is the Jeater and the debit side the difference is written on the debit side as a gross profit i is finally listed on the credit of the income statement. When the debit side exceeds the credit rating is the difference between gross loss recorded on credit and finally shown on the debit side of the income statement.

General Account Item :

A) Debt Collection Page

1. Opening stock. It is the stock that remained unsold at the end of last year. It must have been brought into books with the help of opening hours; so it always appears in the trial. In general, it is shown as the first item of debetum trading accounts. Of course, in the first year of operation there will be no opening in stock.

2. Buy. There are usually other items on debit transactions. The average purchase price "buys", ie. cash as well as loan purchases. All backwards (buy back) should deduct purchases to find out the net purchases. Sometimes products are received for the relevant account from the supplier. In such cases, on the date of preparation of final accounts, an invoice must be made to debit the purchase account and lend the supplier's invoice vendors with the cost of the goods.

3. Acquisition cost. All purchases of goods are also debited to the current account. These include wages, carriage of freight, duties, cleaning fees, port charges, excise duties, patents and import charges, etc.

4. Production. Such expenses are incurred by businessmen to produce or deliver the product in a commercially available condition, such as incentives, gas fuel, stores, fees, factory costs, wage earners and wages and salaries etc.

Although Production Charges Are Limited Production Account since we are preparing a single current account, such costs can also be included in the current account.

(B) Credit Page

1. Sales. Sell ​​the average total turnover ie. cash as well as a credit card. If there are any depreciation on sale, then it should be deducted from the sale. Thus, the net sale is placed on the current account. If the company's property has been sold, it should not be included in the sale.

2. The finalized. It is the value of stocks that are unsold in Jews or stores on the last day of the accounting year. Usually closed stock is given off legal status in the case where it is shown on the credit of the current account. But if it is given in the trial balance, it should not be shown on the current account balance but shown only in the balance sheet as an asset.

Validation Requirement Estimate

In order to evaluate the value of the closing stock, it is necessary to complete the total list or list of all things in the god together. by volume. Based on physical examination, inventories are made and the value of the total inventory is calculated on the basis of unit prices. Thus, it is clear that equity positions include (i) listing, (ii) pricing. Each item is priced at cost unless market price is lower. Pricing in stock at a cost is easy if the cost is fixed. But prices are still fluctuating; so stock estimates are made on the basis of many metric methods.

Account preparation helps business to know the relationship between the cost and revenue earned and how effective they have been. Gross profit for sale is very important: it has arrived:

Gross Revenue X 100 / Sale

With the help of G.P. the ratio of which he can determine how effective he drives the company higher proportion, much better efficiency.

Closing records related to a current account

To transfer various invoice and purchase bills:

(i) To open inventory: Current account and loan balance

(ii) For purchases: Payment Terms and Loan Account, Amount the amount after deduction of purchase returns.

(iii) For the purchase of the cost of return: The letter of credit restores the account and the lending account.

(iv) For invoices: Payment intermediation and lending account

(v) For direct costs: Payment intermediation and expenses for lending accounts separately.

(vi) For sale: Current account and current account. We will find that all of the accounts mentioned above will be closed, except for the current account

(vii) Before closing the shares: Payment Terms and Trade Account for Current Accounts. two parties confirmed. If the loan page is higher, the result is the total income remaining.

(viii) For profit purposes: Current account and loan balance and profit and loss account If the result is gross loss, the above entry is reversible. [19659003] Profit and Loss Account

Profit and Loss Account is opened by including total income (on credit) or gross loss (debit).

for direct expenses. These expenses are deducted from profit (or added gross loss), resulting in profits or net losses.

The costs recorded in the Profit and Loss Account are managed as "indirect costs". These are categorized as follows:

Sales and Distribution Costs .

These consist of the following expenses:

(a) Salaries and remuneration of salespeople

(b) Commissioners to agents


(g) Packaging costs

(h) Export charges

Administration cost

(d) Sales Tax


(19659005) (a) Office Wages and Salaries

(b) Insurance

and Tax

(f) Refunds

(g) Insurance

(h) Rental

( i) Printing and Stationery

Financial Costs

This includes:

(a) Discount Allowed

(b) Interest on Capital

(c) Interest on loans

(d) Discount on Discount Discount

] Maintenance, Depreciation and Provisions, etc. .

These include the following expense

(a) Revenue

(b) Depreciation of property

(c) Interest or commitment due to doubtful debt


Parallel indirect costs include the taxation side of the income statement of various business losses as well.

(c) Rental Offer

(d) Income from

e) Income from Investments

(a) Discount Received

(b) The Commission Received

19659005] f) Profit from the sale of assets

Defaults recovered

(h) Dividend payment

(i) Premium tax, etc.

Source by Anil Kumar Gupta

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