Trading account is prepares mainly to know the profitability
of the goods bought and sold by the business man.
The items which are shown under trading account relates to
purchases and production.
Trading account consists of two side debit side and credit side
CREDIT SIDE SHOWN ITEMS ARE:---
the items shown in profit and loss account debit side are:---
1.selling and distribution expenses:---
a.salesman's salary and commission
b.commission to agents
c.freight and carriage on sales
h.export duty etc...............
c.rates and taxes
f.printing and stationary etc.......
b.interest on capital
c.interest on loan etc........
4.maintenance,depreciation and provisions:----
c.provision for bad and doubtful debts etc.......
profit and loss account credit side:----
1.gross profit b/d(b/d=brought down)
5.interest on investments
6.dividend received etc...........
balance sheet :----
balance sheet is divided into two parts liabilities and assets
a.authorized share capital
b.issued share capital
c.subscribed share capital
2.RESERVES AND SURPLUS:--
b.profit and loss appropriation surplus
c.specific reserve etc.......
5.CURRENT LIABILITIES AND PROVISIONS:---
b.out standing expenses
c.tax on dividends etc.........
a.land and buildings
b.plant and machinery
c.furniture and fittings
e.copy rights etc......
a.investments in shares
b.investments in debentures etc......
3.CURRENT ASSETS LOANS AND ADVANCES:----
a.cash in hand and at bank
d.prepaid expenses etc.......
A new firm commenced business on 1st January, 2006 and
purchased goods costing
Rs. 90,000 during the year. A sum of Rs. 6,000 was spent on
freight inwards. At the
end of the year the cost of goods still unsold was Rs.
12,000. Sales during the year Rs.
1,20,000. What is the gross profit earned by the firm?
(a) Rs. 36,000
(b) Rs. 30,000
(c) Rs. 42,000
(d) Rs. 38,000