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Trading Account

Filling the trading and profit and loss account

The trial balance is the source of information needed in the trading and profit and loss account. At the end of each accounting period, before the trading and profit and loss account is prepared, the trial balance has to be got ready to ensure the debit and credit totals in it balance each other. The sales and purchases accounts and all the expenses accounts in the general ledgers are then closed, and their closing balances are transferred to the trading and profit and loss account.


Trial Balance as on 31 December 20XX


Debit Credit

$ $
Sales
4,250
Stock 700
Purchases 3,300
Electricity 250
Insurance 160
Printing and stationery 120
Rent 150
General expenses 80
Fixtures and fittings 900
Debtors 1,080
Creditors
1,310
Bank 1,910
Cash 420
Drawings 1,100
Capital
4,610




10,170 10,170




The journal entries used to transfer the required account balances to the trading account are as follow:

Date Accounts Folio Debit Credit



$ $
20XX



31 Dec Trading
700

Stock

700

(Transfer of opening stock)







" Stock
850

Trading

850

(Transfer of closing stock)







" Sales
4,250

Trading

4,250

(Transfer of year's total sales)







" Trading
3,300

Purchases

3,300

(Transfer of year's total purchases)



Stock Account

Date Particulars Folio Amount
Date Particulars Folio Amount



$



$
20XX



20XX


01 Jan Balance b/d
700
31 Dec Trading Account
700
31 Dec Trading Account
850
" Balance c/d
850












1,550



1,550










Sales Account

Date Particulars Folio Amount
Date Particulars Folio Amount



$



$
20XX



20XX


31 Dec Trading Account
4,250
31 Dec Debtors Account

4,250












4,250



4,250










Purchases Account

Date Particulars Folio Amount
Date Particulars Folio Amount



$



$
20XX



20XX


31 Dec Creditors Account
3,300
31 Dec
Trading Account

3,300












3,300



3,300










Trading Account as at 31 December 20XX


Amount

Amount

$

$
Opening stock 700
Sales 4,250
Purchases 3,300
Closing stock 850
Gross profit 1,100








5,100

5,100






Trading Account as at 31 December 20XX

A more usual representation:



$
$
Sales
4,250
Less: Cost of goods sold


Opening stock 700


Purchases 3,300




4,000



Less: Closing stock 850
3,150





Gross profit

1,100






Alternative presentation:


Amount

Amount

$

$
Opening stock 700
Sales 4,250
Purchases 3,300



4,000


Less: Closing stock 850


Cost of goods sold 3,150


Gross profit 1,100








4,250

4,250







Last Updated (Thursday, 07 October 2010 02:44)