Question

Can anyone send me how to prepare a trading account only from trial balance

Answer 1

Answer:

At the end of the financial year or at the end of the financial accounting period, an entity prepares the financial accounting statements to know the profit and loss and also the financial position of the business. These statements help users of financial accounting, information in decision making. In this article, we will see the steps of preparation of trading account.

Browse more Topics under Final Accounts

Steps in the Process of Finalization of Accounts

Profit and Loss Account

Liabilities on the Balance Sheet

Assets on Balance Sheet

Manufacturing Account

Financial Accounting Statements include –

A balance sheet

A trading and profit and loss account

Schedules and notes.

Preparation of Trading Account

Trading account is the first step in the process of preparing final accounts. It helps in finding out the gross profit or gross loss during an accounting year, which is an important indicator of business efficiency

Answer 2

Trading account is prepared with the help of Trial Balance. Trading Account is like a statement which is divided in two parts i.e. Income part and Expenditure Part.

In income part, we show the following details:-

Sales of goods Less Sales ReturnsClosing Stock of goods

In Expenditure part, we show the following accounts:-

Opening stock of goodsPurchases of goods Less Purchase ReturnsAll direct expenses relating to purchase, sale and manufacturing of goods like Cartage & Freight Expenses, Rent for godown or factory, Electricity and Power expenses, wages of workers and supervisors, Packing expenses etc.

Example of Trading Account

From the following trial balance we shall prepare trading account:-

Notes:

Closing stock is never shown in Trial Balance. The amount of closing stock, first, is shown in income side of Trading Account, secondly, it is shown in balance sheet under current asset.In Maximum cases, the value of closing stock is done at the cost or market price whichever is less.Only physical Closing stock is taken on the date of preparation of trading account.Presentation of Trading Account can be done in horizontal form also but the contents remain same.