Why we prepare trading account pl account and balance sheet brainly?
Answers
Explanation:
Preparation of Trading Account
For preparing Trading and Profit and Loss Account we need complete information regarding expenses, incomes, assets and liabilities of the concern. In incomplete records, some details are given and some are missing. Thus, we need to ascertain the missing details in an indirect manner by using the logic of double-entry.
The most common items that are missing and we have to find out for preparing Trading and Profit and Loss Account are:
1.Opening capital
2.Credit Purchases
3.Credit sales
4.Bills payable accepted
5.Bills receivable received
6.Payments to creditors
7.Payments to debtors
Any other cash/bank related items.
As we know that opening capital can be obtained by preparing the statement of affairs at the beginning of the year. For other items that are missing, we can easily obtain them by preparing accounts such as total debtors and total creditors, total bills receivable and total bills payable accounts and summary of cash.
Ascertainment of Credit Purchases
Generally, the credit purchase figure is not available from the incomplete records. It is possible that some other information related to creditors may also be missing. So, we will prepare the total creditors to account so that, credit purchases or any other missing figure related to creditors, as the case may be, can be ascertained as the balancing figure.
Ascertainment of Credit Sales
Generally, the figure of credit sales is also not available from incomplete records. Some other information which is related to debtors may also be missing. Therefore, we will prepare the total debtors to account so that the number of credit sales or any other missing figure, as the case may be, can be traced out as the balancing figure.
Ascertainment of Bills Receivable and Bills Payable
To find out the figure of the bills received during the year, we prepare Bill’s Receivable account. Also, to find out the figure of the bills accepted during the year, we prepare the Bills Payable account.
Ascertainment of Missing Information through Summary of Cash
Sometimes, it is possible that the amount paid to creditors or the amount received from debtors may be missing. Also, the opening or closing cash or bank balance may be missing. So to ascertain any missing item of receipt of payment, we prepare a cash book summary. It shows all receipts and payments during the year and the balancing figure is the amount of missing item.
In case both amount paid to creditors and that received from debtors are missing. In that case, we will obtain the amount of any one of these first through the total creditors or total debtors account. And the other missing information we will ascertain from the cash book summary. After the missing figures are obtained, we can prepare the final accounts straight away or after the preparation of the trial balance...