Salaries , , , , , , , , , Sundry creditors Purchases returns Sales Commission received Capital , , , , , , , Accountancy - Repairs Rent and taxes Cash in hand Land Drawings Bank deposits , , , , , , , , , , , , , , Solution In the books of Sharan Dr. Trading and profit and loss account for the year ending 31st December, Cr. To Opening stock To Purchases Less: Purchases returns To Carriage inwards To Wages To Gross loss b/d To Salaries To Repairs To Rent and taxes , , , , , , , , , , , , , , , , , , By Sales By Stock (closing) By Gross loss c/d By Commission received By Net loss (transferred to capital account) , , , , , , , , , , , , , , Balance sheet as on 31st December, Liabilities Assets Capital Less: Net loss Less: Drawings Sundry creditors , , , , , , , , , , , Land Stock in trade Bank deposits Cash in hand , , , , , , , , , , , Tutorial note Trading account and profit and loss account are prepared together. The first part is trading account, whereas the second part is profit and loss account.
Accountancy - Points to remember Trading and profit and loss account is a nominal account in nature. It means that while preparing this account, the rule of nominal account is followed. On the debit side of trading account, direct expenses and opening stock are shown. Direct expenses include the purchase price of goods purchased and all other expenses which are incurred to bring the goods to the business premises or godown and to make these ready for sale.
On the credit side of trading account direct income, i.e. sales and closing stock are shown. On the debit side of profit and loss account, indirect expenses and losses are shown. On the credit side of this account, indirect incomes and gains are shown.
Indirect expenses are those expenses incurred for office, administration and selling and distribution. Indirect incomes and gains are the incomes or gains which are not directly related