Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 1 of 11
FINAL ACCOUNTS OF TRADING CONCERN
1. Gross Profit =Net Sales – Cost of goods sold
Net sales =
Total Sales – Sales Returns or Returns inward
Cost of Goods sold =
Opening Stock + Net Purchases + Direct expenses - Closing Stock
Net Purchases =
Total purchases – Purchases returns or returns outward
Direct Expenses =
Purchasing expenses for goods + Manufacturing Expenses
D i r e c t E x p e n s e s Purchasing expenses for goods Manufacturing Expenses
1. Carriage OR Carriage Inward OR Carriage on purchases OR Carriage & Cartages.
1. Coal, Gas, Steam, Water, Fuel, Power
2. Freight OR Railway Freight 2. Excise duty
3. Octroi 3. Productive Expenses
4. Royalty 4. Wages OR Wages & salary
5. Import duty 5. Factory lighting
6. Custom duty 6. Factory Heating
7. Dock charges 7. Factory Rent, Rates, Taxes and Insurance
8. Clearing charges 8. Other Factory Expenses
9. Unloading Charges 9. Haulage
10. Order placement expenses 10. Factory manager or Works Manager salary
11. Factory worker’s / staff’s salary
12. Stores Overheads
13. Oiling and Cleaning of Machines
14. Technical Directors Fees
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 2 of 11
2. Net Profit =
Gross profit + All Incomes + All Gains OR Profits - Indirect expenses – All Losses
Incomes Gains Indirect expenses Losses
Operating Expenses Non
Operating Expenses
Office and Administrative
Expenses
Selling and Distribution Expenses
Commission Received A/c
Profit on sale of Assets
Salaries & Wages
Carriage outward
Interest on loan Loss on sales of
fixed Assets
Discount Received A/c
Profit on sale of investments
Rent, rates & Taxes
Carriage on sales
Interest on capital
Loss on Sales of Investments
Interest Received A/c
Bad debts recovered
Printing & Stationery
Loading Charges
Donations Bad Debts
Rent Received Grant received Lighting Advertisement Charity Loss by fire
Interest on Investments
Insurance premium
Commission Finance Charges
Loss by theft
Dividends on Shares
Telephone Charges
Brokerage Loss by
accidents
Tax refund Legal charges Export duty
Interest on drawings
Audit fees packing charges
Establishment
exp. Delivery van
exp.
Trade exp. Stable exp.
General Charges Discount allowed
Bank Charges Agent’s Salary
Postage & Telegrams
Sales tax
Depreciation on office’s Fixed
Assets
Depreciation on Sales
Department’s Fixed Assets
Repairs &
Maintenance Entertainment
Expenses
Director fees Sales Promotion
Expenses
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 3 of 11
Trading and Profit & Loss Accounts (For the year ended …..)
Dr. Cr. Particulars Amounts Particulars Amounts
To Opening Stock XXX By Sales XXX To Purchases XXX (-) Sales Returns (XXX) XXX (-) Purchases Returns
(XXX) By Goods sent on consignments XXX
(-) Dis. on purchases (XXX) XXX By Goods supplied to branch XXX To Direct Expenses XXX By Goods withdrawn by Owner* XXX To Gross profit c/d (B/F) By Goods distributed as sample* XXX By Goods gave as charity* XXX By Goods lost* XXX By Closing Stock XXX By Gross loss c/d (B/F)
Total XXX Total XXX To Gross loss b/d
XXX
By Gross profit b/d
XXX
To Indirect Expenses XXX By All Incomes XXX To All Losses XXX By All Gains & profits XXX To Net Profit (B/F) By Net Loss (B/F) (Transferred to Capital A/c) (Transferred to Capital A/c)
Total XXX Total XXX
Balance Sheet (As on ……………………)
Liabilities Amounts Assets Amounts Bank overdraft XXX Cash in Hand XXX B/P XXX Cash at bank XXX Creditors XXX Debtors XXX Outstanding Expenses XXX B/R XXX Advance Income XXX Closing Stock: XXX Loans XXX Prepaid Expenses XXX Bank Loans XXX Accrued Incomes XXX Capital XXX Investments XXX (+) Additional Capital XXX Loan and Advances XXX (+) Interest on Capital XXX Goodwill XXX (+) Net Profit XXX Land and Building XXX XXX Plant & Machinery XXX (-) Drawings (XXX) Furniture, Fixtures & Fittings XXX (-) Interest on Drawings (XXX) Car XXX (-) Net Loss (XXX) XXX Loose Tools XXX Patents right XXX Copy right XXX Trade Mark XXX
Total XXX Total XXX
*These items, alternatively
deducted from purchases.
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 4 of 11
FINAL ACCOUNTS OF MANUFACTURING CONCERN
Manufacturing, Trading and Profit & Loss Account Dr. (For the year ended …………..) Cr.
Particulars Amounts Particulars Amounts To Opening Stock of WIP By Sales of Scrap XXX To Raw Material Consumed: By Cost of Joint Product XXX Opening Stock XXX By Cost of by Product XXX (+) Purchases of R/M XXX By Closing Stock of WIP XXX (+) Carriage Inward XXX By Trading Account c/d (B/F) (+) Freight inward XXX (Cost of goods production transferred) (-) Return Outward of R/M (XXX) (-) Closing Stock (XXX) XXX To Wages XXX To Salary of Works Manager XXX To Power, Electricity & Water XXX To Fuel XXX To Factory Postage & Telephone XXX To Depreciation on: Plant & Machinery XXX Factory land & Building XXX To Repairs to: Plant & Machinery XXX Factory Land & Building XXX To Insurance: Plant & Machinery XXX Factory Land & Building XXX To Factory Rent & Taxes XXX To Factory General Expenses XXX To Royalty based on Production XXX
Total XXX Total XXX To Opening Stock of finished goods XXX By Sales XXX To Purchases of F/G XXX (-) Sales Returns (XXX) XXX (-) Purchases Returns of F/G (XXX) By Goods sent on consignments XXX (-) Discount on purchases (XXX) XXX By Goods supplied to branch XXX To Manufacturing Account b/d XXX By Goods withdrawn by Owner* XXX (Cost of goods production transferred) By Goods distributed as sample* XXX To Purchasing Exp. of F/G XXX By Goods gave as charity* XXX To Gross profit c/d (B/F) By Goods lost* XXX By Closing Stock of finished goods XXX By Gross loss c/d (B/F)
Total XXX Total XXX To Gross loss b/d XXX By Gross profit b/d XXX To Indirect Expenses XXX By All Incomes XXX To All Losses XXX By All Gains & profits XXX To Net Profit (B/F) By Net Loss (B/F) (Transferred to Capital A/c) (Transferred to Capital A/c)
Total XXX Total XXX *These items, alternatively deducted from purchases.
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 5 of 11
Balance Sheet (As on ……………………)
Liabilities Amounts Assets Amounts
Bank overdraft XXX Cash in Hand XXX
B/P XXX Cash at bank XXX
Creditors XXX Debtors XXX
Outstanding Expenses XXX B/R XXX
Advance Income XXX Closing Stock: XXX
Loans XXX Raw Material XXX
Bank Loans XXX Work-in-progress XXX
Capital XXX Finished Goods XXX XXX
(+) Additional Capital XXX Prepaid Expenses XXX
(+) Interest on Capital XXX Accrued Incomes XXX
(+) Net Profit XXX Investments XXX
XXX Loan and Advances XXX
(-) Drawings (XXX) Goodwill XXX
(-) Interest on Drawings (XXX) Land and Building XXX
(-) Net Loss (XXX) XXX Plant & Machinery XXX
Furniture, Fixtures & Fittings XXX
Car XXX
Loose Tools XXX
Patents right XXX
Copy right XXX
Trade Mark XXX
Total XXX Total XXX
Class Notes / Working Notes
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 6 of 11
A D J U S T M E N T S T A B L E
ADJUSTMENTS JOURNAL ENTRY EFFECT IN TRADING A/C PROFIT & LOSS
A/C BALANCE SHEET
Dr. Cr. Dr. Cr. Liabilities Assets
1. Closing Stock. Closing Stock A/c Dr. To Trading A/c
Adjusted Purchases and Closing Stock: - If the amount of closing Stock is appearing in the trial balance, it means that opening and closing stock both have been adjusted in the purchase (Adjusted Purchase = Opening Stock + Total Purchases – Purchase return – Closing Stock). Only closing stock will be given in the trial balance and it will be shown on the Assets side of the Balance Sheet. It will not be shown in the trading Account as it has already adjusted in the purchases.
2. Outstanding direct Expenses [due but not paid]
Direct Expenses A/c Dr. To out/s Direct Exp. A/c
(+)In Direct Exp.
3. Outstanding indirect Exp. [Due but not paid]
Indirect Exp. A/c Dr. To out/s Indirect Exp. A/c
(+) in Indirect
Exp.
Outstanding expenses appearing in trial balance: - If outstanding expenses are given on the credit side of the trial balance, it means that outstanding expenses are already adjusted in the relevant expenses account. In this case outstanding expenses will be shown only on the liabilities side of Balance Sheet.
4. Prepaid / Unexpired Direct Exp. [Exp. Paid in Advance]
Prepaid Direct Exp A/c Dr. To Direct Exp. A/c
(-) from Direct Exp.
5. Prepaid /
Unexpired Indirect Exp. [Exp. Paid in Advance]
Prepaid Indirect Exp A/c Dr. To Indirect Exp.
(-)from Indirect
Exp.
Prepaid / Unexpired expenses appearing in trial balance: - If Prepaid / Unexpired expenses are given on the Debit side of the trial balance, it means that Prepaid / Unexpired expenses are already adjusted in the relevant expenses account. In this case Prepaid / Unexpired expenses will be shown only on the Assets side of Balance Sheet.
6. Accrued Income or outstanding income [ Due but not received]
Accrued Income A/c Dr. To Income A/c
(+) in Income
* If accrued income is already appearing on the debit side of the trial balance, than it will be shown on the assets side of the balance sheet only.
7. Advance Income or unexpired Income [Received in Advance]
Income A/c Dr. To Advance Income A/c
(-) from Income
* If income received in advance is already appearing on the credit side of trial balance, it will be shown only in the liabilities side of balance sheet.
8. Interest on loan [ Due but not paid]
Interest on loan A/c Dr. To loan A/c
(+) in loan
Implied adjustments: - If a loan account carrying certain rate of interest is given on the credit side of the trial balance, than it is
essential to calculate interest at the rate mentioned should be made for outstanding interest on loan, as mentioned above. 9. Interest on capital
[charged by owner]
Interest on capital A/c Dr. To capital A/c
(+) in capital
10. Interest on Drawings [Int. due on drawing
Drawing A/c Dr. To int. on Drawing A/c
(+) in drawing or
(-) from capital
11. Interest on Investment [Int. due but not received]
Accrued Intt. A/c Dr. To Intt. On Investment A/c
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 7 of 11
12. Advance received from costumer / debtors, but includes in creditors.
Creditors A/c Dr. To Adv, from Debtors A/c
(-) from Creditors & separately
disclosed as Adv. From debtors.
13. Advance paid to supplier / creditors, but includes in debtors.
Adv. to Suppliers A/c Dr. To Debtors A/c
(-) from Debtors& separately disclosed as Adv. to creditors.
14. Bill receivable Dishonored.
Debtors A/c Dr. To B/R A/c
(+) in Debtors & (-) from
B/R
15. Bill discounted Dishonored.
Debtors A/c Dr. To Bank A/c
(+) in Debtors & (-) from Bank A/c
16. Bill Discounted but not matured.
No any journal entry passed, show in liabilities side as FOOT NOTE.
Show as FOOT NOTE
17. Bad debts OR bad debts written off
a) at the time of bad debts: Bad debts A/c Dr. To Debtor A/c b) Bad debts written off, If Provision for bad debts are not maintained: P. & L. A/c Dr. To Bad debts A/c c) Bad debts written off, If Provision for bad debts are maintained: Prov. For B/D A/c Dr. To Bad Debts A/c
(-) from debtors
* If bad debts are already appearing in the trial balance, then these should be shown only on the debit side of profit and Loss Account.
18. Provision for Bad Debts [maintained the provision]
P. & L. A/c Dr. To Prov. For B/D A/c
(-) from debtors
Provision for bad debts already appearing in the trial balance: - When Provision for bad and doubtful debts is already appearing on the credit side of trial balance, it is called old provision. In this case bad debts, new provision for bad debts and old provision will appear in final accounts as follows:
P r o f i t a n d l o s s A / c Particulars Rs. Particulars Rs.
To Bad debts (given in trial balance) XXX (+) Further bad debts (given in adjustments) XXX (+) New Provision (given in adjustments) XXX XXX (-) Old Provision (given in trial balance) (XXX)
XXX
NOTE: i. If old provision for bad debts is more than the sum of bad debts and new provision, then these items will be shown on
the credit side of profit and Loss Account. ii. It is to be noted that calculation of New provision for bad debts should be the amount of debtors left after adjusting
all other adjustments (Excluding Next Adjustment) related to debtors and after deducting further bad debts. iii. There is no need to make a provision for bad debts on GOOD DEBTS.
B a l a n c e S h e e t Liabilities Rs. Assets Rs.
Debtors XX (-) Further bad debts (given in adjustments)XX XX (-) New provision (given in adjustments) XX
XXX
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 8 of 11
19. Provision for Discount on Debtors { prov. maintained]
P. & L. A/c Dr. To Prov. For Dis. A/c
(-) from debtors
* It is to be noted that calculation of provision for Discount on debtors should be the amount of debtors left after deducting further bad debts and New provision for bad & doubtful debts.
20. Provision for Discount on Creditors { prov. maintained]
provision for discount Dr. To P. & L. A/c
(-) from creditors
21. Goods withdrawn by owner. [not entered]
Drawing A/c Dr. To purchase A/c (-) from
purchase
(+) in Drawing or (-)in capital
22. Private Purchases recorded as Business Purchases.
Drawing A/c Dr. To purchase A/c (-) from
purchase
(+) in Drawing or (-)in capital
23. Goods given as Charity. [not entered]
Charity A/c Dr. To Purchases A/c
(-) from purchase
24. Goods distributed as free samples. [not entered]
Advertisement A/c Dr. To Purchases A/c
(-) from purchase
25. Use of goods in Business as Assets.
Respective Assets A/c Dr. To Purchases A/c
(-) from purchase
26. Goods gave to customer on approval (Return) Basis but entered in the Books as a actual sales
Sales A/c Dr. To Debtor A/C
(-) from sales at
SP (+) in closing stock at
CP
(-)from Debtors at
SP (+) in closing stock at
CP
27. Goods returned by customer taken in to stock but not entered in the Books.
Sales Return A/c Dr. To Debtors A/c
(-) from Sales
(-)from debtors
28. Goods in transit but not Entered in the books.
Goods in transit A/c Dr. To Creditors A/c
(+) in purchases
(+) in closing stock
(+) in
creditor
(+) in closing stock
29. Loss of Goods.
Loss by ___ A/c Dr. To purchase A/c
(-)from purchases
30. Insured goods lost worth Rs.5000 but Insurance Co. accepted the claim for Rs. 3000.
Loss by ___ A/c Dr. 2,000 [actual loss] Ins. Claim A/c Dr. 3000 [claim ] To purchase A./c 5000 [total loss]
(-) from purchase total loss Rs.5000
At actual
loss Rs.2000
At claim Rs. 3000
31. Purchased any fixed Assets, but recorded in Purchases book or Purchases A/c
Respective Assets A/c Dr. To Purchases A/c
(-)from purchases
32. Exp. Related to fixed assets purchased or installed recorded as Direct exp.
Fixed Assets A/c Dr. To Direct Exp. A/c
(-) from Expenses
(+) in Fixed Assets
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 9 of 11
33. Depreciation Charged on Fixed Assets
Depreciation A/c Dr. To Fixed Assets A/c
(-) From Fixed Assets
*If depreciation is already appearing on the debit side of trial balance it will be shown only in the Dr. side of Profit and Loss Account.
34. Loss of Fixed Assets.
Loss by ___ A/c Dr. To Fixed Assets A/c
(-) From Fixed Assets
35. Loss of insured fixed assets.
Loss by ___ A/c Dr. [actual loss] Ins. Claim A/c Dr. [claim ] To Fixed Assets A./c [total loss]
At
actual loss
(-) From Fixed
Assets At total loss
& Show of
ins. Claim
36. Invoice not received for goods purchased.
Purchases A/c Dr. To Creditors A/c
(+) in Purchase
(+) in
Creditors
37. Salaries / Rent / Interest less tax.
Salaries/ Rent / Intt. A/c Dr. To Income tax A/c
(+) in Exp.
38. Employer’s Contribution in provident fund [not shown in trial Balance ]
Salary A/c Dr. To provident fund A/c
(+) in salary
39. Profit on Joint Ventures / Consignment.
Joint Ventures A/c Dr. To Profit & Loss A/c
40. Manager’s Commission Payable on profit.
Commission A/c Dr. To Comm. payable A/c
Commission payable calculated as follows: -
i. When commission is payable on net profit before charging such commission =
Net profit before commission Rate of Commission / 100
ii. When commission is payable on net profit after charging such commission =
Net profit before commission Rate of Commission / (100 + Rate)
Class Notes / Working Notes
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Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 10 of 11
Mukesh Agarwal Research Group FINAL ACCOUNTS OF TRADING CONCERN (CPT Notes 2008)
AECIndia.Commerce, G M Ext. Place, Shinde Ki Chhawani, Gwalior-474001 +91-751-2424240, 98930-16415
CS/CA Guidance ClassesE-mail: [email protected], [email protected] Page 11 of 11