Trading account shows:

Gross profit or loss. It finds the gross result of trading.

Statement of assets and liabilities. It is a statement, not an account.

Cost of goods sold = Opening stock + Purchases + Direct expenses -

Closing stock. Closing stock is deducted.

Outstanding expenses are shown on the balance sheet as:

A liability. They are amounts still owed.

Indirect expenses are debited in the:

Profit and Loss Account. Office and selling expenses go to P&L.

Maharashtra State Board · HSC Commerce · Class 11 (Std XI)

Class 11 Book Keeping and Accountancy Chapter 9: Final Accounts of a Proprietary Concern

Short notes, key concepts, quick revision and practice MCQs with answers

Final accounts show the result of business operations and its financial position: the Trading Account, the Profit and Loss Account and the Balance Sheet, prepared from the trial balance with adjustments.

Key concepts: Final Accounts of a Proprietary Concern

Trading Account: Shows Gross Profit or Gross Loss: Sales less Cost of Goods Sold (Opening stock + Purchases + Direct expenses - Closing stock).
Profit and Loss Account: Shows Net Profit or Loss after indirect expenses and other incomes.
Balance Sheet: Statement of assets and liabilities at a given date; it is not an account.
Adjustments: Closing stock, outstanding and prepaid expenses, accrued and unearned income, depreciation, bad debts and provision for doubtful debts.
Capital and revenue: Capital items go to the balance sheet; revenue items go to the trading or P&L account.

Quick revision: important points

Gross Profit = Net Sales - Cost of Goods Sold.
Net Profit increases capital in the balance sheet; drawings reduce it.
Outstanding expenses are added to the expense and shown as a liability.

Practice MCQs with answers

Trading account shows:
1. Gross profit or loss
2. Net profit only
3. Assets
4. Capital
Show answer
Answer: A. Gross profit or loss
It finds the gross result of trading.
Balance Sheet is a:
1. Statement of assets and liabilities
2. Ledger account
3. Journal
4. Bank statement
Show answer
Answer: A. Statement of assets and liabilities
It is a statement, not an account.
Cost of goods sold = Opening stock + Purchases + Direct expenses -
1. Closing stock
2. Sales
3. Drawings
4. Capital
Show answer
Answer: A. Closing stock
Closing stock is deducted.
Outstanding expenses are shown on the balance sheet as:
1. A liability
2. An asset
3. Capital
4. Income
Show answer
Answer: A. A liability
They are amounts still owed.
Indirect expenses are debited in the:
1. Profit and Loss Account
2. Trading Account
3. Balance Sheet
4. Ledger only
Show answer
Answer: A. Profit and Loss Account
Office and selling expenses go to P&L.

All Class 11 Book Keeping and Accountancy chapters

Chapter 1: Introduction to Book-keeping and Accountancy
Chapter 2: Meaning and Fundamentals of Double Entry Book-keeping
Chapter 3: Journal
Chapter 4: Ledger
Chapter 5: Subsidiary Books
Chapter 6: Bank Reconciliation Statement
Chapter 7: Depreciation
Chapter 8: Rectification of Errors
Chapter 9: Final Accounts of a Proprietary Concern
Chapter 10: Single Entry System

Class 11 Book Keeping and Accountancy notes: all chapters