FINAL ACCOUNT
Lecture # 03
Trading Account Items with Brief Explanation
Trading concern
Trading concern are those which do not manufacture goods, rather, they buy
finished goods from the manufacturer or wholesaler and sell them to retailer or direct
to customers.
Followings arc the items which are include in the debit side of the trading
account
1. Opening Stock:
Opening stock consists of raw materials, work in progress and finished goods
depending upon the nature of business. In merchandising business, the opening stock
consists of finished goods. In manufacturing concern, opening stock consists of raw
materials.
2. Purchase
Purchase includes both credit purchase and cash purchase. Purchase is available
in trial balance.
3. Purchase Returns
Purchase returns is appear in the credit side of trial balance. Purchase returns
may be shown by deduction from purchases.
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, 4. Purchase discount/Discount on purchase
A purchase discount, also called a cash discount, is a reduction in the price of
a good if the buyer pays for it within the allowable period. In other words, this is an
incentive that the seller gives to the buyer in hopes that the buyer will pay for the
purchase in full before the actual due date.
Purchase discount may be shown by deduction from purchases.
5. Direct Expenses
Direct expenses are directly related to the production of the product sold or service
rendered.
Or
Direct expenses means all the expenses which are directly attributable to the
purchase of goods. These are some examples of direct expenses.
I. Wages/direct wages/productive wages:
The remuneration paid to the workers for the loading and unloading of
purchased goods or Wages paid to workers, who are directly engaged in the production,
are direct expenses. Workers may be employed to manufacture merchandise or make
it more saleable. Similar types of items are debited to Trading Account.
II. Carriage /carriage inward/carriage on purchase:
These are transportation expenses met for bringing the goods purchased to the
business place. It is debited to the trading account.
III. Freight /freight inward/transportation inward
Charges paid on bringing purchased goods from abroad through steamer, rail or
air are known as freight. Being an expense connected with the purchase of goods, it is
debited to the trading account.
IV. Import duty /customs duty:
In case of goods imported from abroad, import duty, customs duty or dock
charges etc. have to pay. Since these are related to purchase of goods for resale
purposes, these expenses are shown in the debit side of the Trading Account.
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Lecture # 03
Trading Account Items with Brief Explanation
Trading concern
Trading concern are those which do not manufacture goods, rather, they buy
finished goods from the manufacturer or wholesaler and sell them to retailer or direct
to customers.
Followings arc the items which are include in the debit side of the trading
account
1. Opening Stock:
Opening stock consists of raw materials, work in progress and finished goods
depending upon the nature of business. In merchandising business, the opening stock
consists of finished goods. In manufacturing concern, opening stock consists of raw
materials.
2. Purchase
Purchase includes both credit purchase and cash purchase. Purchase is available
in trial balance.
3. Purchase Returns
Purchase returns is appear in the credit side of trial balance. Purchase returns
may be shown by deduction from purchases.
1
, 4. Purchase discount/Discount on purchase
A purchase discount, also called a cash discount, is a reduction in the price of
a good if the buyer pays for it within the allowable period. In other words, this is an
incentive that the seller gives to the buyer in hopes that the buyer will pay for the
purchase in full before the actual due date.
Purchase discount may be shown by deduction from purchases.
5. Direct Expenses
Direct expenses are directly related to the production of the product sold or service
rendered.
Or
Direct expenses means all the expenses which are directly attributable to the
purchase of goods. These are some examples of direct expenses.
I. Wages/direct wages/productive wages:
The remuneration paid to the workers for the loading and unloading of
purchased goods or Wages paid to workers, who are directly engaged in the production,
are direct expenses. Workers may be employed to manufacture merchandise or make
it more saleable. Similar types of items are debited to Trading Account.
II. Carriage /carriage inward/carriage on purchase:
These are transportation expenses met for bringing the goods purchased to the
business place. It is debited to the trading account.
III. Freight /freight inward/transportation inward
Charges paid on bringing purchased goods from abroad through steamer, rail or
air are known as freight. Being an expense connected with the purchase of goods, it is
debited to the trading account.
IV. Import duty /customs duty:
In case of goods imported from abroad, import duty, customs duty or dock
charges etc. have to pay. Since these are related to purchase of goods for resale
purposes, these expenses are shown in the debit side of the Trading Account.
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