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19.2 Double Entry Book Keeping—ISC XI
CHAPTER SUMMARY
• Final Accounts include (i) Trading Account, (ii) Profit & Loss Account, and (iii) Balance Sheet. Final Accounts
are prepared on the basis of Trial Balance.
• Trading Account is the account, which shows the gross profit or gross loss. Its contents are revenue receipts
(such as sales, fee for services rendered, etc.) on the credit side and revenue expenditure (such as cost of
sales or services rendered on the debit side).
• Profit & Loss Account is the account which shows the net profit or net loss of the business for an accounting
period. It is credited with the gross profit and non-business revenue incomes and ‘debited with gross loss
and the indirect revenue expenses’.
• Balance Sheet is a statement which sets out the assets and liabilities of a firm or an institution as at a
certain date. It is true on that particular date as every transaction has an impact on the Balance Sheet.
• Marshalling means arrangement of assets and liabilities in a particular order in the Balance Sheet. Assets
may be arranged in the form of liquidity or permanence.
Format of Trading Account
Dr. TRADING ACCOUNT for the year ended ... Cr.
Particulars ` Particulars `
To Opening Stock ... By Sales ...
To Purchases ... Less: Returns Inward ... ...
Less: Returns Outward ... ... By Closing Stock ...
To Wages and Salaries ... By Abnormal Loss of Stock ...
To Freight Inwards ... By Gross Loss c/d* ...
To Carriage Inwards ... (Transferred to Profit & Loss A/c)
To Factory Power and Fuel ...
To Factory Expenses (e.g., Rent and Insurance) ...
To Gross Profit c/d* ...
(Transferred to Profit & Loss A/c)
... ...
*Either Gross Profit or Gross Loss will appear.
