Department of Technical Education

Andhra Pradesh
Name N.sambaiah
Designation Head of Section
Branch DCCP
Instititute Suvr & SR Govt.Polytechnic
for Women,Ethamukkala.

Year I year
Subject Accountancy –I
Subject code CCP-102
Topic Final Accounts
Duration 50 minutes
Sub-topic Preparation of Trading and P&L A/c

Balance Sheet
CCP102.131 1

Teaching a aids PPT, Animations

OBJECTIVES OF THE LESSON

 On completion of the period, student would be able to

 Prepare Trading account, Profit and Loss account and
Balance Sheet (without adjustments)

CCP102.131 2
 Illustration - 1
From the following Trial Balance of Tirumala Traders, Kurnool
prepare Trading and Profit and Loss account and Balance Sheet as
on 31-03-2007.
Trial Balance
particulars Debit Credit
Rs. Ps Rs. Ps
Cash 2200
purchases 125000
Opening Stock 34000
Sundry debtors 40000
Plant and machinery 70000
Furniture 10000
Bills receivable 15000
Rent & taxes 5000
Wages 21000
Salaries 35000
capital 110000
Bill payable 24000
Sundry creditors 22000
sales 200000
Provision for bad debts` 2000
------------ ---------------
357200 357200

CCP102.131 3
 Explanation–items in trial balance-
Debit side
 Cash – It is an asset --- to be entered in assets of Balance
sheet
 Opening stock, purchases – to entered in the debit
side of Trading account
 Sundry debtors – it is an asset – to be entered in the
assets side of Balance sheet
 Plant & machinery – it is an asset –to be entered in the
assets of Balance sheet
 Furniture – it is an asset – to be entered in the asset side of
Balance sheet
 Contd….

CCP102.131 4
Explanation Contd…
 Bills receivable – it is an asset – to be entered on the
assets side of the Balance sheet
 Rent & taxes, salaries – debit side of profit and loss
account
 Wages – debit side of trading account

CCP102.131 5
Explanation— Trial Balance
 Capital -- Owner’s own fund. It is to be entered on the
liabilities side of Balance sheet
 Bills payable – it is a liability- to be entered on the liabilities
side of Balance sheet
 Sundry creditors – it is a liability – to be entered on the
liabilities side of Balance sheet
 Sales - credit side of trading account
 Provisions for bad debts –it is a provision made against the
last year’s bad debts. It is an income to the present year.
Hence it is credited in profit and loss account. This year a new
provision is made and debited to profit and loss account

CCP102.131 6
Credit side items contd.
 Closing stock --- is available at the date of
preparation of the final accounts. It does not come
in trial balance. It is to be entered twice in final
accounts
1.Credit side of the trading account.
2.Asset side of the balance sheet.

CCP102.131 7
Solution
Trading account for the year ending 31-3-07

Dr Cr
particulars Amount Amount
Particulars
Rs. Ps Rs Ps
To opening stock 34000 By sales 200000
To purchases 125000 By closing 50000
To wages 21000 stock
To gross profit (transferred 70000
to profit & loss account)
------------ -----------
250000 250000
------------ -----------

CCP102.131 8
Solution contd.
Profit and loss account of Tirumala Traders, Kurnool for the
year ending 31-3-07
Dr Cr

particulars Amount particulars Amount

Rs. Ps Rs. Ps
To rent and taxes 5000 By gross profit 70000
To salaries 35000 By provision for 1200
To net profit ( transferred 31200
to capital account) bad debts

------------- -------------
71200 71200
------------- ------------

CCP102.131 9
 Solution contd.
Balance sheet of Tirumala Traders, Kurnool as on 31-3-07

Liabilities Amount Assets Amount

Rs. Ps Rs. Ps
Bills payable 24000 Cash 2200
Sundry creditors 22000 Sundry debtors 40000
Closing stock 50000
Capital 110000 Plant & 70000
Add. Net profit 31200 machinery
---------- 141200 Furniture 10000
----------- Bills receivable 15000
187200 -----------
----------- 187200
------------

CCP102.131 10
Summary

 Balance sheet has two sides

 It is prepared after preparing Trading and Profit &
Loss Account
 It reveals the true financial position of the concern

CCP102.131 11
 Quiz
1. Plant & Machinery appears in _____side of the
B/S

c) Liabilities
d) Assets
e) Debits
f) Credit

8. Balances of all accounts are listed in ______

i) Trial Balance
j) P&L a/c
k) Trading a/c
l) None of above

CCP102.131 12