Trading and profit and loss account format for sole traders and partnership firms, with worked examples, what goes in each account, and a free Excel template that computes gross and net profit.
Trading account format
| Dr. Particulars | Amount | Cr. Particulars | Amount |
|---|---|---|---|
| To Opening stock | 1,20,000.00 | By Sales | 12,40,000.00 |
| To Purchases | 8,60,000.00 | Less: Sales returns | (20,000.00) |
| Less: Purchase returns | (15,000.00) | By Closing stock | 1,45,000.00 |
| To Wages | 64,000.00 | ||
| To Carriage inwards | 9,000.00 | ||
| To Power and fuel | 21,000.00 | ||
| To Gross profit c/d | 3,06,000.00 | ||
| Total | 13,65,000.00 | Total | 13,65,000.00 |
Credit side: net sales 12,20,000 plus closing stock 1,45,000 = 13,65,000. Debit side before gross profit: 10,59,000. Gross profit = 3,06,000. The Excel template does this arithmetic for you.
Profit and loss account format
| Dr. Particulars | Amount | Cr. Particulars | Amount |
|---|---|---|---|
| To Salaries | 96,000.00 | By Gross profit b/d | 3,06,000.00 |
| To Rent | 48,000.00 | By Discount received | 4,000.00 |
| To Electricity | 14,000.00 | By Commission received | 9,000.00 |
| To Printing and stationery | 6,000.00 | ||
| To Depreciation | 18,000.00 | ||
| To Interest on loan | 12,000.00 | ||
| To Bad debts | 3,000.00 | ||
| To Net profit (to capital) | 1,22,000.00 | ||
| Total | 3,19,000.00 | Total | 3,19,000.00 |
What goes where
| Trading account | Profit and loss account |
|---|---|
| Opening and closing stock | Office and selling expenses (salaries, rent, advertising) |
| Purchases and returns | Financial expenses (interest, bank charges) |
| Direct expenses (wages, carriage inwards, power, freight inwards) | Depreciation, bad debts |
| Sales and returns | Other incomes (commission, discount received, interest) |
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Gross profit ratio
Gross profit divided by net sales, as a percentage, shows the margin on trading. In the example, 3,06,000 divided by 12,20,000 is about 25 per cent. Compare it year to year: a falling ratio can mean higher purchase prices or discounting.
Downloadable Excel
Frequently asked questions
Why is gross profit carried down?
It is the result of the trading account and becomes the first credit item of the profit and loss account.
Is carriage outwards a direct expense?
No. Carriage outwards is a selling expense and goes to the profit and loss account.
Checked and updated 14 Oct 2026. Independent template site; not tax or legal advice.