From the following Balances of Jayashri Traders, you are required to prepare Trading Account for the year ended 31/03/2019


Particulars  

Debit 

 Amount (₹) 

Credit 

Amount (₹) 

Opening Stock 

41,000 

 

Purchases 

59,000 

 

Purchases Returns 

 

7,000 

Sales Returns 

1,600 

 

Sales 

 

1,03,000 

Wages 

3,400 

 

Carriage Inward 

1,000 

 

Royalty 

4,000 

 

Total 

1,10,000 

1,10,000 


 
 Closing Stock ₹ 40,000 


Solution  

In the Books of Jayashri Traders for the year ended 31st March 2019.


Trading Account 

Particulars 

Amount      (₹) 

Amount         (₹) 

Particulars 

Amount           (₹) 

Amount         (₹) 

To Opening Stock 

 

41,000 

By Sales 

(-) Sales Return 

1,03,000 

(1,600) 

 

1,01,400 

To Purchase 

(-) Purchase Return 

59,000 

(7,000) 

 

52,000 

 

 

 

To Wages  

 

3,400 

 

 

 

To Carriage inward 

 

1,000 

 

 

 

To Royalty 

 

4,000 

By Closing Stock 

 

40,000 

To Gross Profit 

 

40,000 

 

 

 

 

 

1,41,400 

 

 

1,41,400 

Explanation
1) Opening Stock
Opening Stock is a number of goods in the organization. Opening Stock is always comes in debit side of Trading account because Trading account is made to record the all trading activities. 
Journal Entry for Opening Stock:
Trading A/c       Dr.
    To Opening Stock A/c

2) Purchase and Purchase Return
When goods bought in business in accounts we write Purchase and Sometimes certain goods get damage or supplied extra goods we write Purchase Return. As we have done Trade of goods therefore Purchase and Purchase Return are debited to debit side of Trading Account.
Journal Entry for Purchase and Purchase Return:
A) Trading A/c       Dr.
            To Purchase A/c
B)  Purchase Return A/c       Dr.
            To Trading A/c
We Subtract Purchase Return from Purchase because the number of goods which are return are to be less from the goods are bought.


3) Sales and Sales Return
When goods are sold we write Sales and the goods which are sold and return into business are Sales Return. As it is also a trade of goods therefore credited to credit side.
Journal Entry for Sales and Sales Return
A) Sales A/c       Dr.
          To Trading A/c 
B) Trading A/c        Dr.
          To Sales Return A/c

4) Wages, Carriage inward and Royalty.
Wages, Carriage inward and Royalty are the expenses of Trading Activities. Therefore stated in Trading Account.
Journal Entry for Wages, Carriage inward and Royalty.
Trading A/c       Dr.
      To Wages A/c
      To Carriage inward A/c
      To Royalty A/c

5) Closing Stock 
Closing Stock is the number of goods which are unsold for the given date.
Journal Entry for Closing Stock 
Closing Stock A/c     Dr.
      To Trading A/c

6) Gross Profit 
Gross Profit is the amount of which is incurred from Trade before others revenue.
Trading A/c         Dr.
      To Profit & Loss A/c
(Being Gross Profit transferred to Profit & Loss A/c)

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