write the following account information with samples.
1) traiding account
2) profit and loss account
3) balance sheet
Answers
Answer:
3 . balance sheet pleas make me brainly
Explanation:
business needs to prepare a trading and profit and loss account first before moving on to the balance sheet. Trading and profit and loss accounts are useful in identifying the gross profit and net profits that a business earns.
The motive of preparing trading and profit and loss account is to determine the revenue earned or the losses incurred during the accounting period.
The trading and profit and loss account are two different accounts that are formed within the general ledger. The two parts of the account are:
1. Trading Account
2. Profit and Loss Account
Trading account is the first part of this account, and it is used to determine the gross profit that is earned by the business while the profit and loss account is the second part of the account which is used to determine the net profit of the business.
Let us know more about these accounts in detail
1. Trading Account
Trading account is used to determine the gross profit or gross loss of a business which results from trading activities. Trading activities are mostly related to the buying and selling activities involved in a business. Trading account is useful for businesses that are dealing in the trading business. This account helps them to easily determine the overall gross profit or gross loss of the business. The amount thus determined is an indicator of the efficiency of the business in buying and selling.
The formulae for calculating gross profit is as follows:
Gross profit = Net sales – Cost of goods sold
Where
Net sales = Gross sales of the business minus sales returns, discounts and allowances.
The trading account considers only the direct expenses and direct revenues while calculating gross profit. This account is mainly prepared to understand the profit earned by the business on the purchase of goods.
Items that are seen in the debit side includes purchases, opening stock and direct expenses while credit side includes closing stock and sales.
Closing entries for Gross Loss or Gross Profit
The following entries are passed
In case of Gross Loss
Profit and Loss A/c Dr.
To Trading A/c
In case of Gross Profit
Trading A/c Dr.
To Profit and Loss A/c
Preparing Trading Account
Trading account is prepared by closing all the temporary purchases and revenue accounts and making adjustments in the inventory accounts by the use of a closing journal entry
Profit and Loss Account
Profit and loss account shows the net profit and net loss of the business for the accounting period. This account is prepared in order to determine the net profit or net loss that occurs during an accounting period for a business concern.
Profit and loss account get initiated by entering the gross loss on the debit side or gross profit on the credit side. This value is obtained from the balance which is carried down from the Trading account.
A business will incur many other expenses in addition to the direct expenses. These expenses are deducted from the profit or are added to gross loss and the resulting value thus obtained will be net profit or net loss.
The examples of expenses that can be included in a Profit and Loss Account are:
1. Sales Tax
2. Maintenance
3. Depreciation
4. Administrative Expense
5. Selling and Distribution Expense
6. Provisions
7. Freight and carriage on sales
8. Wages and Salaries
These appear in the debit side of Profit and Loss Account while Commission received, Discount received, profit obtained on sale of assets appear on the credit side.
Net profit can be determined by deducting business expenses from the gross profit and adding other incomes obtained
Net profit = Gross profit – Expenses + Other income
Closing Entries for Net Loss or Net Profit:
i. In case of Net Loss
Capital A/c – Dr.
To Profit and Loss A/c
ii. In case of Net Profit
Profit and Loss A/c -Dr.
To Capital A/c
Trading and Profit and Loss Account Format