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FINAL ACCOUNT

Trading Account & Profit and Loss Account
Purpose of business is to earn profit. Trader is in position to know how well he has fared during a trading period. Uncommon for a business end up into a loss. The trader determines the profitability of the business by preparing financial Account, Profit and Loss Account.
Trading Account
The purpose of this account determines gross profit or loss. Gross profit is the excess of the sales over cost of goods sold, including the expenses directly attributable to put goods in a saleable condition.
The cost of the goods is represented by the value of the goods purchased during the period, including carriage in bringing the goods to the trade premises.
Gross profit (GP) = Sales – Purchases.
Gross loss (GL) = Purchases – Sales.
Stock: Unsold goods and are of two kinds, opening stock and closing stock.
Opening stock: is unsold goods which available at the beginning of trading period e.g. Available before starting business.
Closing stock: unsold goods available at the end of trading period i.e. goods remained unsold at the end of trading period.
TRADING PERIOD
Is the period which a proprietor uses to evaluate his / her business to check of earn/ profit or losses from a business. Usually will be one year.
TRADING ACCOUNT FORMAT.
DR TRADING ACCOUNT CR
Details/Particular

Amount
Details/Particular
Amount
Opening Stock
xxx
Sales
xxx
Add: Purchases
xxx
Goods available for sales
xxx

Less: Closing stock
xxx
Cost of goods sold
xxx
Gross profit c/d
xxx

xxx
xxx
Gross Profit
b/d
xxx
Example.1:
Prepare trading Account for the year ended 2008.
Purchases 18,000
Sales 27,000
Stock at 1.1.2008 3,000
Stock at 31.12.2008 1,500
Solution

DR TRADING ACCOUNT FOR THE YEAR ENDED 31.12.2008 CR
Details/Particular
Amount
Details/Particular
Amount
Opening Stock
3,000
Sales
27,000
Add: Purchases
18,000
Good available for sales
21,000
Less: Closing stock
1,500
Cost of goods sold
19,500
Gross profit c/d
7,500

27,000
27,000
Gross Profit
b/d
7,500

EXERCISE.1
PREPARE TRADING Account for the year ended 2008.
Purchases 12,000
Sales 30,000
Stock at 1.1.2008 5,000
Stock at 31.12.2008 2,000

EXERCISE.2
Prepare trading Account for the year ended 2008
Purchase 70,000
Sales 120,000
Stock at 1.1.2008 30,000
Stock at 31.12.2008 25,000
EXERCISE.3
Prepare trading Account for the given the following.
Purchases 170,000
Sales 180,000
Stock at 1.7.2006 60,000
Stock at 30.6.2007 40,000
Solution.QN1
DR TRADING ACCOUNT FOR THE YEAR ENDED 31.12.2008 CR
Details/Particular
Amount
Details/Particular
Amount
Opening Stock
5,000
Sales
30,000
Add: Purchases
12,000
Good available for sales

17,000
Less: Closing stock
2,000
Cost of goods sold
15,000
Gross profit
c/d
15,000

30,000
30,000
Gross Profit
b/d
15,000
Solution.QN2
DR TRADING ACCOUNT FOR THE YEAR ENDED 31.12.2008 CR
Details/Particular
Amount
Details/Particular
Amount
Opening Stock
30,000
Sales
120,000
Add: Purchases
70,000
Good available for sales
100,000
Less: Closing stock
25,000
Cost of goods sold
75,000
Gross profit
c/d
45,000

120,000
120,000
Gross Profit
b/d
45,000
Solution.QN3
DR TRADING ACCOUNT FOR THE YEAR ENDED 31.12.2008 CR
Details/Particular

Amount
Details/Particular
Amount
Opening Stock
60,000
Sales
180,000
Add: Purchases
170,000
Gloss loss
c/d
10,000
Good available for sales

230,000
Less: Closing stock
40,000
Cost of goods sold
190,000

190,000
190,000
Gloss loss
c/d
10,000
PROFIT AND LOSS ACCOUNT
This account is used to determine net profit or net loss.
Net profit means actual profit obtain in the business which credited to the profit and loss a/c.
DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2008 CR
Transport
Xxxx
Gross profit b/d

Discount received
Xxxx
Rent
Xxxx
Xxxx
Other expenses
Xxxx
Net profit
Xxxx
Xxxx
Xxxx
Carriage Inwards.
Means transport of goods purchased. This occurs when a buyer has been paid the cost of transporting goods.
Carriage Outwards.
Transport charge of goods which paid by seller to transport goods to his customer. This occurs when seller paid cost of transporting goods.
RETURNS.
Return Inwards.
This occurs when the seller received goods returned from his customer.
Return Outwards
This occurs when the buyer returned goods to his supplier.
EXAMPLE
Prepare profit and loss Account from example given for the year ended 2004.
Gross profit 45,000
Stationary 9,000
Water bill 7,500
Electricity 5,000
Wages 2,800
General expenses 5,500
Solution
DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 3 DEC 2004 CR
Details
Amount
Details
Amount

Stationary
9,000
Gross profit
45,000
Water bill
7,500
Electricity
5,000
wages
2,800
General expenses.
5,500

Net profit
15,200
45,000
45,000
EXERCISE.1
Prepare profit and loss Account from the example given for the year ended 2007.
Gross profit 120,000.
Stationery 22,000.
Water bill 15,000.
Electricity 58,000.
Wages 7,500.
General exp. 42,300.
EXERCISES 2
PREPARE PROFIT AND LOSS Account from the example given for the year ended 2002.
Gross profit 150,000
Stationary 33,000
Water bills 10,000
Electricity 28,000
Wages 15,000
General exp 3,000

EXERCISE 3.
Prepare trading, Profit and loss Account for the year ended 30 June 2003
Purchase 140,000
Sales 220,000
Stock at 1.July 2003 25,000
Stock at 30 June 2oo3 5,000
Traveling expenses 1,050
Electricity 1,200
Wages 3,000
General expenses 5,000
Rent 2,500
EXERCISE.4
Given the following information prepare Trading, Profit and loss Account for the year ended 2006.
Stock on July 2005 35,000
Stock on June 20,000
Purchases during the year 97,000
Sales during a year 180,000
Carriage inwards 7,000
Carriage outwards
5,000
Return in ward 3,000
Return out ward 1,200
Water bill 2,000
Stationery 2,500
Wages 2,500
Insurance 2,000
Stationery 1,000

EXERCISE.5
Prepare trading, profit and loss Account for the year ended 2006.
Stock at July 2005 – 15,000
Stock at June 2006 – 32,000
Purchases during the year- 85,000
Sales during the year – 225,000
Carriage in ward – 5,200
Carriage out wards – 2,000
Return in wards- 5,000
Return out wards – 15,000
Stationery- 7,000
Insurance- 3500
Electricity – 2,500
Rent- 4,000
Fumigation- 3,500
Water bills 2,500

EXERCISE.6
June 1 Balance of cash in hand 500
Balance at bank 10,000
2 Received cash from Mbigili. 250
3 Paid Chacha by cheque 1,200
4 Received cheque from Minza and banked it. 300
6 Received cash from Tatiro 120
10 Paid rent by cheque 500
15 Paid wages by cash 200
18 Paid cash to bank 100

20 Drew cash from bank for office use 200

Enter the above transactions in the cash Book and carry down the balance as at 25th June.

SOLUTIONS
Solution.QN1

DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2007 CR

Details

ecolebooks.com
Amount
Details
Amount
Stationary
22,000
Gross profit
120,000
Water bill
15,000
Electricity
5,800
wages
7,500
General expense.
42,300
Net profit
27,400
120,000
120,000
Solution.QN2

DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2007 CR
Details

Amount
Details
Amount
Stationary
33,000
Gross profit
150,000
Water bill
10,000
Electricity
28,000
wages
15,000
General expense.
3,000
Net profit
61,000
150,000
150,000
Solution.QN3
DR TRADING ACCOUNT FOR THE YEAR ENDED 31.12.2008 CR
Details/Particular
Amount
Details/Particular
Amount
Opening Stock
25,000
Sales
220,000
Add: Purchases
140,000
Good available for sales
165,000

Less: Closing stock
5,000
Cost of goods sold
160,000
Gross profit c/d
60,000
220,000
220,000
Gross profit
b/d
60,000

DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2007 CR
Traveling exp
1,050
Gross profit
60,000
Electricity
1,200

Wages
3,000
General exp
5,000
Rent
2,500
Net profit
47,250
60,000
60,000
Solution.QN4
DR TRADING, P&L ACCOUNT FOR THE YEAR ENDED 31.12.2008 CR
Details/Particular
Amount
Details/Particular
Amount
Opening Stock
35,000
Sales
180,000
Add: Purchases

97,000
Less: Return in ward
3,000
Add: carriage in wards
7,000
177,000
Goods available for sales
139,000
Less: Returned out ward
1,200

137,800
Less: Closing stock
20,000
cost of goods sold
117,800
Gross profit
c/d

59,200
177,000
177,000
Gross profit
c/d
59,200
Carriage out ward
5,000

Water bill
2,000
Stationery
2,500
Wages
2,500
Insurance
2,000

Stationery
1,000
Net profit
44,200
59,200
59,200

Solution.QN5
DR TRADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 2006 CR
Details/Particular
Amount
Details/Particular
Amount
Opening Stock
15,000
Sales
225,000
Add: Purchases

85,000
Less: Return in ward
5,000
Add: carriage in wards
5,200
220,000
Goods available for sales
105,200
Less: Returned out ward
15,000
90,200
Less: Closing stock
32,000
cost of goods sold
58,200
Gross profit
c/d
161,800
220,000
220,000
Gross profit
b/d
161,800
Carriage out ward
2,000
Stationary
7,000
Insurance
3,500
Electricity
2,500
Water bill
2,500

Rent
4,000
Fumigation
3,500
Net profit
136,800
161,800

161,800






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EcoleBooks | BOOK KEEPING O LEVEL(FORM ONE) NOTES - FINAL ACCOUNT

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1 Comment

  • EcoleBooks | BOOK KEEPING O LEVEL(FORM ONE) NOTES - FINAL ACCOUNT

    Sorry, June 22, 2023 @ 4:33 pm Reply

    Eqn and answ for all subjects

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