LA 8 - Periodic Trading Entity

Question 1

Trading section

Answer 1

Sales, sales returns, purchases, purchases returns, inventory, etc

Question 2

Profit or loss section

Answer 2

Income, expenses etc

Question 3

Step 1

Answer 3

Close sales returns off to sales account

Debit: Sales
Credit: Sales returns

Question 4

Step 2

Answer 4

Close net sales off to trading account

Debit: Sales
Credit: Trading account

Question 5

Step 3

Answer 5

Close purchases returns off to purchases

Debit: Purchases returns
Credit: Purchases

Question 7

Step 4

Answer 7

Close net purchases off to trading account

Debit: Trading account
Credit: Purchases

Question 8

Step 5

Answer 8

Transfer opening inventory to trading account

Debit: Trading account
Credit: Inventory (Opening)

Question 9

Step 6

Answer 9

Bring closing inventory into account based on physical inventory count

Debit: Inventory (Closing)
Credit: Trading account

Question 10

Step 7

Answer 10

Close of carriage on purchases/ railage on purchases off to trading account

Debit: Trading account
Credit: Carriage on purchases/ railage on purchases

Question 11

Step 8

Answer 11

Close gross profit off to profit or loss account

Debit: Trading Account
Credit: Profit or loss account

Question 12

Step 9

Answer 12

Close income accounts off to profit or loss account

Debit: Income accounts
Credit: Profit or loss

Question 13

Step 10

Answer 13

Close expense accounts off to profit or loss account

Debit: Profit or loss
Credit: Expense account

Question 14

Step 11

Answer 14

Close net profit/loss off to capital account

IF PROFIT
* Debit: Profit or loss
* Credit: Capital

IF LOSS
* Debit: Capital
* Credit: Profit or loss

Question 15

Step 12

Answer 15

Close drawings account off to capital account

Debit: Capital
Credit: Drawings