Basic Accounting Terms
Part – 5 · Trading Account
& Balance Sheet
Opening Stock, Purchases, Sales, Closing Stock · Trade Payables & Trade Receivables
📝 Handwritten Class Note
CA Devesh Thakur’s handwritten note for Day 5 — save it for quick revision!
🎬 Watch Day 5 Reel on Instagram
Basic Accounting Terms – Part 5
@cadeveshthakur.official
Trading Account & Balance Sheet explained — Opening Stock, Purchases, Sales, Closing Stock, Trade Payables & Trade Receivables. Day 5 of 50 Days Accounting Challenge 📒
▶ Watch on InstagramDay 5: Trading Account & Balance Sheet
In Day 4 we learned Revenue, Profit, Gain & Loss. Today in Day 5, we see where all these figures actually go — into the two most important financial statements: the Trading Account and the Balance Sheet. We’ll also learn key terms like Opening/Closing Stock, Trade Payables, and Trade Receivables that appear in every set of accounts!
📒 Trading Account (Extract)
What is a Trading Account?
Trading Account ek financial statement hai jo batata hai ki business ne goods sell karke kitna Gross Profit ya Gross Loss kamaya. Isme sirf direct items aate hain — goods khareedna, bechna, aur stock. Indirect expenses isme nahi aate.
Trading Account
For the Year Ended — (Extract)
- Raw Material
- Work-in-Progress
- Finished Goods
Opening Stock
Pichle accounting year ke end mein jo maal bacha tha — wahi is saal ki shuruat mein Opening Stock ban jaata hai. Yeh Trading Account ke Debit (Dr.) side mein aata hai.
Opening Stock of current year = Closing Stock of previous year.
Purchases & Purchase Returns
Iss saal jo maal resale ke liye kharida gaya, woh Purchases hai. Agar supplier ko kuch maal wapas kiya, to woh Purchase Returns (Return Outward) hai — isse Net Purchases kam hota hai.
- Purchase Returns — Supplier ko maal wapas karna → Purchases se minus
- Net Purchase = Purchases − Purchase Returns
Sales & Sales Returns
Customer ko jo maal becha gaya woh Sales hai — Credit (Cr.) side mein aata hai. Agar customer maal wapas laya, to woh Sales Returns (Return Inward) hai — isse Net Sales kam hota hai.
- Sales Returns — Customer ne maal wapas kiya → Sales se minus
- Net Sales = Sales − Sales Returns
Closing Stock
Saal ke end mein jo maal bacha hota hai — use Closing Stock kehte hain. Yeh Trading Account ke Credit (Cr.) side mein aata hai aur Balance Sheet mein Current Asset ke roop mein bhi dikhta hai.
- Raw Material — Kachcha maal jo abhi bana nahi
- Work-in-Progress — Adha bana maal
- Finished Goods — Taiyaar maal jo abhi bika nahi
🔄 Purchase Returns vs Sales Returns
↩️ Purchase Returns (Return Outward)
Jab business ne supplier ko maal wapas kar diya — kisi defect ya over-supply ke kaaran. Yeh directly Purchases ko reduce karta hai.
↩️ Sales Returns (Return Inward)
Jab customer ne business ko maal wapas kar diya. Yeh directly Sales ko reduce karta hai.
📊 Balance Sheet (Extract)
What is a Balance Sheet?
Balance Sheet ek snapshot hai business ki financial position ka — ek specific date par. Isme do sides hoti hain: Liabilities (business kise dena hai) aur Assets (business ke paas kya hai). Dono sides hamesha equal hoti hain: Assets = Capital + Liabilities.
Balance Sheet
As at — (Extract)
Trade Payables
Business ne jo paise dene hain suppliers ko — yeh Trade Payables hai. Balance Sheet ke Liabilities side mein aata hai. Iske do components hain:
- Creditors (Accounts Payable) — Supplier se maal udhar pe liya, paise abhi dene hain
- Bills Payable — Hum ne likh ke diya hai ki future mein paise denge
Trade Receivables
Business ko jo paise milne hain customers se — yeh Trade Receivables hai. Balance Sheet ke Assets side (Current Assets) mein aata hai. Iske do components hain:
- Debtors (Accounts Receivable) — Maal udhar pe becha, paise abhi lene hain
- Bills Receivable — Customer ne likh ke diya hai ki future mein paise dega
Common Confusion: Creditors vs Debtors
Creditors = Log jinhein hum paise dene hain (Suppliers) → Liability. Debtors = Log jinse hume paise milne hain (Customers) → Asset. Easy trick: Creditor = Credit milaa humein; Debtor = Debit kiya humne unhe.
Connection with Previous Days
Day 2: Closing Stock = Current Asset on Balance Sheet (as seen in Day 2 Assets classification).
Day 3: Purchases = Revenue Expenditure. Sales = Revenue Receipt.
Day 4: Gross Profit = Net Sales − COGS; Trading Account produces the Gross Profit figure used in Day 4’s Income Statement.
📊 Quick Summary — All 8 Terms
| Term | Statement | Side | Simple Definition |
|---|---|---|---|
| Opening Stock | Trading Account | Dr. (Debit) | Pichle saal ka bacha hua maal jo is saal laaya |
| Purchases | Trading Account | Dr. (Debit) | Iss saal maal kharida — resale ke liye |
| Purchase Returns | Trading Account | Dr. (Less from Purchases) | Supplier ko maal wapas kiya |
| Sales | Trading Account | Cr. (Credit) | Customer ko maal becha |
| Sales Returns | Trading Account | Cr. (Less from Sales) | Customer ne maal wapas kiya |
| Closing Stock | Trading Account + Balance Sheet | Cr. + Current Asset | Saal ke end mein bacha maal (RM + WIP + FG) |
| Trade Payables (Creditors + Bills Payable) | Balance Sheet | Liabilities | Suppliers ko dene wale paise |
| Trade Receivables (Debtors + Bills Receivable) | Balance Sheet | Assets (Current) | Customers se milne wale paise |
