write the proforma of trading account profit and loss account, balance sheet and adjustments
Answers
Answer:
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.
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.