Question

How would you treat the profit or loss on trading activities carried on by club?

Answer 1

Answer:

A trading account should be prepared for each trading activity in order to calculate the gross profit or loss earned. The gross profit or loss of a trading activity of a non trading concern is transferred to the income and expenditure account. If it is gross profit, it is shown as income and if it is gross loss, shown as expenditure in the income and expenditure account.

While preparing the trading account of bar or any other trading activity, if the purchase figure is not given, it can be calculated as:-

Purchases = closing creditors + payments to creditors – opening creditors.

Accumulated fund on the opening date = total assets on the opening date – total liabilities on the opening date. It can be calculated by preparing an opening statement of affairs (balance sheet format) on the opening date, as a balancing figure.

Answer 2

All trading activities done by a individual should be done via a trading account.

A trading account is an account that is used for all the trading activities done by an individual in the stock market. This type of account started to be used post-adoption of electronic systems by stock markets. Trading accounts should be used to measure all the profits and losses made by the individual on all the trading activities carried out by them.

The gross profits should be shown as income and the gross loss should be shown as an expenditure.