Trading, profit and loss account questions and answers

A new sole trader’s trial balance every time. Prepare the trading, profit and loss account and the balance sheet, without adjustments or with them, and check every figure.

Course
Level

Set

How answers are marked
  • Amounts are whole and must be exact. Commas and the currency sign are fine.
  • For each income and expense line, choose the item and type its amount, in any order.
  • A line taken off, such as returns, closing stock or drawings, may be typed plain, in brackets or with a minus.
  • A net loss, or working capital below nil, needs brackets or a minus.
  • A total that follows from your own wrong figures is marked not yet, with a note that the method is right.
  • CBSE: leave the net profit or net loss line that does not apply empty.

    Answers are saved on this device as you type.

    How the problems are made

    Each problem is an invented trader’s year, posted entry by entry to a ledger, so the trial balance agrees and the balance sheet balances. Level 1 is the trading account only, from balances that include a few that do not belong there. Level 2 is the full final accounts without adjustments, with closing stock given as a note. Level 3 adds one adjustment; level 4 has four to six, as in the exam.

    The JSS3 setting uses smaller figures and stops at level 2. The CBSE setting follows the NCERT account form, with depreciation on the book value in the trial balance.

    A worked answer: set PRFT22

    Kelechi Obi’s sales were ₦5,200,000 and returns inwards ₦96,000, so net sales were ₦5,104,000. Opening stock ₦375,000, plus purchases ₦3,819,000 and carriage inwards ₦64,000, less returns outwards ₦25,000, gives ₦4,233,000 of goods available. Less closing stock of ₦340,000, the cost of goods sold was ₦3,893,000 and gross profit ₦1,211,000. Seven expenses, from salaries of ₦270,000 to carriage outwards of ₦30,000, came to ₦539,000, so net profit was ₦672,000. Capital of ₦2,645,000, plus the profit, less drawings of ₦122,000, is ₦3,195,000: the same as fixed assets of ₦2,920,000 plus working capital of ₦275,000.

    Open set PRFT22 to fill it in yourself.

    Questions

    What goes in the trading account and what goes in the profit and loss account?

    The trading account works out gross profit: sales less returns inwards, less the cost of goods sold (opening stock, plus purchases less returns outwards, plus carriage inwards, less closing stock). The profit and loss account starts from gross profit, adds other income such as discount received or rent received, and takes off the running expenses, such as salaries, rent, carriage outwards, discount allowed, depreciation and bad debts, to give net profit.

    Does carriage inwards go in the trading account?

    Yes. Carriage inwards is the cost of bringing goods in, so it is added to purchases in the trading account. Carriage outwards is the cost of delivering goods to customers, a selling expense, so it goes in the profit and loss account.

    Why is closing stock not in the trial balance?

    Stock is counted after the books are balanced, so it is given as a note below the trial balance. It is then used twice: taken off the cost of goods sold in the trading account, and shown as a current asset in the balance sheet. If a trial balance already shows the closing stock (NCERT calls the purchases then adjusted purchases), it goes in the balance sheet only.

    Are drawings an expense?

    No. Drawings are what the owner takes out of the business, so they are taken off capital in the balance sheet, after adding the net profit. Goods the owner takes for their own use are taken off purchases and added to drawings.

    How do I treat an expense owing and an expense paid in advance?

    The profit and loss account charges the expense for the whole year, paid or not. Add an amount still owing to the figure in the trial balance and show it as a current liability. Take an amount paid for next year off the figure and show it as a current asset.

    How is the provision for doubtful debts shown?

    Write off any further bad debts first, then work out the provision as a percentage of the debtors that are left. Only the change in the provision goes in the profit and loss account: an increase is an expense and a decrease is income. In the balance sheet the whole new provision is taken off debtors.

    How do the WAEC, IGCSE and CBSE layouts differ?

    The WASSCE syllabus says trading, profit and loss account and balance sheet; this site draws them in the vertical form. Cambridge IGCSE says statement of profit or loss and statement of financial position, with inventory, trade receivables and trade payables. NCERT, for CBSE class 11, uses the account form: expenses on the debit side, revenues on the credit side, and a balance sheet with liabilities on the left.

    Sources, checked October 28, 2026: WASSCE Financial Accounting syllabus (PDF, RACHEL copy of the WAEC text), sections 4 and 5; WAEC Chief Examiners’ reports on 2016 question 7 and 2022 question 8; Cambridge IGCSE Accounting 0452 syllabus for 2026 (PDF) and for 2027 to 2029 (PDF); NCERT Accountancy class 11 Part II, chapter 8, Financial Statements I (PDF) and chapter 9, Financial Statements II (PDF).