format of trading account
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Trading account is a nominal account. in trading account we post factory related Expenses and losses in the debit side and all incomes & profits in the credit side . if balance of credit side is more than debit side, it shows gross profit ( balancing figure) on the other hand debit side balance is more than credit side, it means gross loss( balancing figure) and posted this gross loss in the debit side of the profit and loss account.In this video , we discuss about closing enteries of trading account. first of we discuss about financial statements, financial statement is a statement which provide the status of business means business runs in profit or loss. finanacial statements is divided into two parts:
income statement & Balance sheet
Income Statement is also divided in two parts:
Trading account & Profit and Loss Account
here we discuss closing enteries of Trading account
before doing entry we have to know about what is trading account?
Trading account is nominal account. in Trading account we enter factory related expenses. here is basic rule for entering nominal account means trading account (Commerce) i.e. ” Debit all the expenses & loses, Credit all the Incomes & Gains.” In Trading account we enter
wages & salaries
coal , gas & fire
Manufacturing expenses etc.
in debit side of Trading account( accountancy)
Remember one thing i.e. salaries and wages should not enter in the Trading Account(accountancy)
How to know about gross profit and gross loss:
if debit balance is more than credit balance it means gross loss, if credit balance is more than debit balance it means gross profit.