Department of Technical Education

Government of Andhra Pradesh

Name : N. Sambaiah
Designation : Head of Section
Branch : DCCP
Institute : SUVR & SR Govt Polytechnic for
women,Ethamukkala
Year : I year
Subject : Accountancy
Subject code : CCP-102
Topic : Final Accounts
Duration : 50 Minutes
Sub topic : Preparation of Trading account and
profit and loss account
Teaching aids : PPT, Animations

CCP102.128 1
 Objectives

 On completion of the lesson you would be able to

 do the profit and loss account
 Understand the preparation of trading and profit and
loss account

CCP102.128 2
Assignment problem
Prepare profit and loss account from the following for the year
ended 31.3.2007.
Gross profit Rs. 20000
Salaries 4000
Carriage outwards 600
Postage and telephone 900
Printing and stationery 500
Office insurance 300
Interest paid 600
Advertisement 1000
Commission paid 800
Discount received 600
Rents received 500
Interest on investment 200
Bad debts 800

CCP102.128 3
Solution (assignment)
Profit and loss account for the year ending 31-3-2007
Dr cr
particulars Amount Particulars amount
Rs. Ps Rs. Ps
To salaries 4000 By gross profit 20000
To carriage outwards 600 By discount received 600
To postage and telephones 900 By rents received 500
To printing and stationery 500 By interest on investment 200
To office insurance 300
To interest paid 600
To advertisement 1000
To commission paid 800
To bad debts 800
To net profit (transferred to 11800
capital account) ------------ ------------
21300 21300
-------------- ------------

CCP102.128 4
Exercise:
Prepare the trading and profit and loss account from the following trial balance of
Srikrishna Traders, Madras for the year ending 31-12-07.

Particulars Debit Particulars Credit

Stock on hand 12,400 Capital 50,000

Cash 3,400 Sales 1,87,200
Sundry Debtors 18,200 Returns Outwards 3,600
Purchases 1,22,600 Sundry creditors 8,000
Returns inwards 1,000 Misc. receipts 200
Freight inwards 7.400
Freight outwards 14,400
Salaries 21,000
Rent 12,000
Drawings 12,600
Machinery 21,600
Deprection on 2,400
Machinery

Closing Stock: Rs.15,600

CCP102.128 5
Items not to be recorded in trading & P&L A/c

Capital account: This amount is brought by the owner and it is

entered in balance sheet at the liability side.
Cash account: It is an asset. It is shown on asset side in
balance sheet.
Sundry creditors: It is a liability. Firm has to pay this amount. It
is shown on liability side of the balance sheet.
Drawings: Owner sometimes withdraw some amount from the firm
for his personal expenses. This is called drawing. Drawings
are deducted from the capital account.
Machinery: It is an asset. It is shown on assets side of the balance sheet.

CCP102.128 6
Solution.
Srikrishna traders, Madras trading and profit and loss account for the year
ending 31-12-2007.
Dr Cr

Particulars Amount particulars Amount

Rs Ps Rs Ps

To opening stock 12400 By sales 187200

To purchases 122600 Less: returns 1000
less:returns 3600 --------- 186200
---------- 119000 By closing stock 15600
To freight inward 7400
To gross profit 63000
------------ ------------
201800 201800
------------- -------------
To freight outward 14400 By gross profit 63000
To salaries 21000 By Misc. receipts 200
To rent 12000
To depreciation on machinery 2400
To net profit (transferred to capital 13400
account. ----------------- -------------
63200 63200
---------------- ---------------

CCP102.128 7
Summary
 In this lesson, student have learned how to prepare
trading and profit and loss account
 Trading account and profit and loss account can be
prepared either individually or jointly
 Some items which are only shown in balance sheet
are also explained

CCP102.128 8
Quiz
1. Trading and P&L Account can be prepared
b) Separately
c) Jointly
d) Both (a) and (b)
e) None of the above

CCP102.128 9
 Assignment
Prepare trading and profit and loss account for Mr. Rafi of Bombay
for the year ending 312-12-2007. from the following trial balance.
particulars debit credit

Opening stock Rs Ps Rs Ps
raw material 5400
work in progress 6500
finished goods 10100
22000
purchases 12750
motive power 650
motor van repairs 750
motor insurance 800
rates and taxes 900
carriage 200
sales 34400
return inwards 350
return outwards 540
commission 460
discount 845
bad debits 1500 (contd)

CCP102.128 10
Assignment (contd)

450
office rent
550
office salaries
225
octroi
1200
municipal taxes
9000
capital
------------- -----------
42,785 42,785
--------------- ------------
closing stock
raw material 5300
work in progress 7600
finished goods 8600
------------
21500
----------

CCP102.128 11