Final Account

Final accounts include a number of accounts such as (i) Trading accounts (ii) Profit and
loss accounts and (iii) balance sheet. These two statements i.e., trading and profit and loss
account and balance sheet are prepared to give the final results of the business.
Trading account
Trading account is prepared for a specific period to know the trading results of the
business. It is prepared usually by merchandising concerns which purchase goods and sell the
same during a particular accounting period. It is mainly prepared to ascertain the gross profit or
gross loss. Gross profit or gross loss is the difference between actual sale proceeds and the cost
of goods sold.
‘Cost of goods’ consists of
i. The opening stock goods plus net purchases (i.e., purchases less returns) less closing
stock of such goods and
ii. All expenses of bringing the goods into saleable condition and also to the point of sale
i.e., all manufacturing expenses, carriage, cartage, freight, duty etc.
Preparation of Trading Account
Trading account is a ledger account. Therefore, its form and construction conform to the
rules of double entry principles of debit and credit.
A proforma of a trading account is given below: