Question
What is a Trading Account and why is it prepared?
✓
Answer
Preparation of Trading Account is the first stage of preparing final accounts. It is the financial statement which shows result of buying and selling of goods and/ or services during an accounting period.
It is credited with sales, services rendered and closing stock or inventory. Opening stock or inventory, net purchases and other direct expenses are debited in the account. The difference in two sides is either Gross Profit or Gross Loss.
It is credited with sales, services rendered and closing stock or inventory. Opening stock or inventory, net purchases and other direct expenses are debited in the account. The difference in two sides is either Gross Profit or Gross Loss.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.
Explore more
Similar questions
What is a Trading Account and why is it prepared?
On 31st March, 2019, the balance as per the Bank Statement was ₹ 10,000 debit. On the same date, outstanding cheques amounted to ₹ 30,000 and outstanding deposits amounted to ₹ 50,000. Also, there was a dishonoured cheque from a customer of ₹ 5,000 recorded in the Bank Statement but not in the Cash Book. On the basis of the above information, determine the balance as per the Cash Book.
Capital of Ganesh Gupta in the beginning of the year was ₹ 70,000. During the year his business earned a profit of ₹ 20,000, he withdrew ₹ 7,000 for his personal use. He sold ornaments of his wife for ₹ 20,000 and invested that amount into the business. Find out his Capital at the end of the year.
Does Profit and Loss Account show the financial position of the enterprise?
Operating profit earned by M/s Arora & Sachdeva in 2016-17 was ₹ 17,00,000. Its non-operating incomes were ₹ 1,50,000 and non-operating expenses were ₹ 3,75,000. Calculate the amount of net profit earned by the firm.
State the usual adjustments that have to be made when final accounts are prepared.
Total of the Sales Book is posted to the credit side of the Sales Account in the General Ledger while individual account of customers is debited by the amount of their respective purchases. Is the above statement correct? Give reasons.
Complete the following Statemant of Profit or Loss:
Following errors affecting the accounts of the year 2018-19 were detected in the books of Das & Co., Meerut:
- Sale of old furniture for ₹ 5,000 was treated as sales of goods.
- Rent of proprietor’s residence ₹ 6,000 was debited to Rent Account.
- Cash received from Rajesh ₹ 2,150 was credited to Brajesh.
Cash sales of a business in a year were ₹ 85,000, the Cost of Goods Sold (including direct expenses) was ₹ 97,000 and Gross Profit as shown by the Trading Account for the year was ₹ 1,29,000. Calculate Credit Sales during the year.