Final answer:
To prepare the Trading Account, direct costs are calculated on the debit side, and sales and closing stock are on the credit side. Deducting the total expenses from the total revenue gives a Gross Profit of ₹8,69,000. Carriage Outward and Office Lighting are excluded as they are part of the Profit and Loss Account.
Step-by-step explanation:
Trading Account for the Year Ended 31st March 2017
To prepare a Trading Account, we need to consider the direct costs associated with the purchase and sale of goods. Here, we list the relevant items and calculate the Gross Profit.
Debit Side:
- Opening Stock: ₹2,50,000
- Add: Purchases (₹7,00,000 - ₹22,000 Purchases Returns): ₹6,78,000
- Add: Carriage Inward: ₹34,000
- Add: Wages: ₹2,06,000
- Add: Manufacturing Expenses: ₹2,48,000
- Add: Gas, Fuel and Power (pertaining to factory): ₹75,000
- Add: Dock Charges: ₹8,000
- Add: Factory Lighting: ₹96,000
Credit Side:
- Sales (₹18,00,000 - ₹36,000 Sales Return): ₹17,64,000
- Add: Closing Stock: ₹6,00,000
Calculation of Gross Profit:
Total Debit (Expenses): ₹2,50,000 + ₹6,78,000 + ₹34,000 + ₹2,06,000 + ₹2,48,000 + ₹75,000 + ₹8,000 + ₹96,000 = ₹14,95,000
Total Credit (Revenue): ₹17,64,000 + ₹6,00,000 = ₹23,64,000
Gross Profit: Total Credit - Total Debit = ₹23,64,000 - ₹14,95,000 = ₹8,69,000
Here we note that Carriage Outward and Office Lighting are not included in the Trading Account, as they are considered administrative and selling expenses and are therefore part of the Profit and Loss Account.