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Final Accounts of Sole Proprietorship ICSE Class 10

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Commercial StudiesICSE Class 10 · Chapter 9

Final Accounts of Sole Proprietorship ICSE Class 10: Solved Example

Updated 14 October 2026 · Fact-checked

Final accounts of a sole proprietor are the Trading Account (which finds gross profit), the Profit and Loss Account (which finds net profit) and the Balance Sheet (which shows assets and liabilities on the last day). ICSE Class 10 asks you to prepare all three from a trial balance, with closing stock as the only adjustment.

What Final Accounts of Sole Proprietorship is about

At the end of the year a trader wants to know two things: how much profit he made, and what the business owns and owes. Final accounts answer both. They are prepared from the trial balance, the list of all ledger balances.

The 2027 syllabus asks for the meaning and preparation of the Trading Account, the Profit and Loss Account and the Balance Sheet from a given trial balance, with the adjustment of closing stock only. Manufacturing accounts, profit or loss on sale of assets, intangible and fictitious assets, and prepaid and accrued items are excluded. In both 2024 and 2025 the last question of Section B was a full 10-mark final accounts problem, and MCQs tested closing stock (2024), the Trading Account (2025) and carriage inwards (2025). The examiners' reports list the same errors each year: wrong format, interchanged items, closing stock not shown twice, and drawings not deducted from capital.

Weightage: CISCE publishes no chapter weightage. Section A (40 marks) is compulsory, with 1-mark MCQs and short 2-mark answers; in Section B you answer any four of six 10-mark questions.Source: CISCE ICSE Commercial Studies (631) specimen paper structure, 2025, retained for 2027 by the CISCE circular of 9 October 2026

Key concepts

Meaning of final accounts and the trial balance

Final accounts are the statements prepared at the end of an accounting year to find the profit or loss of the business and its financial position. For a sole proprietor they are: (1) the Trading Account, (2) the Profit and Loss Account, and (3) the Balance Sheet, prepared in this order.

They are prepared from the trial balance, a statement of the debit and credit balances of all ledger accounts on a date. Each item in the trial balance is shown once in the final accounts; closing stock, which is given outside the trial balance as an adjustment, is shown twice.

Rule of thumb for where items go: direct expenses and items about goods (purchases, sales, returns, opening stock, wages, carriage inwards) go to the Trading Account; indirect expenses and other incomes go to the Profit and Loss Account; assets, liabilities, capital and drawings go to the Balance Sheet.

Worked example

(2 marks) Name the three final accounts of a sole proprietor and state the order in which they are prepared.

Try it first, then show the solutionSolution
  1. Trading Account, Profit and Loss Account, Balance Sheet - 1 mark.
  2. In this order: Trading gives gross profit used in P&L; P&L gives net profit used in the Balance Sheet - 1 mark.

Answer: The Trading Account, the Profit and Loss Account and the Balance Sheet, prepared in that order, because the gross profit of the Trading Account is carried to the Profit and Loss Account, and its net profit is added to capital in the Balance Sheet.

Trading Account

The Trading Account is prepared to find the gross profit or gross loss from buying and selling goods during the year.

Debit side (To): opening stock; purchases less purchases returns (returns outwards); direct expenses: wages, carriage inwards (freight inwards), import duty, octroi, fuel and power, factory rent. Credit side (By): sales less sales returns (returns inwards); closing stock.

If the credit side is larger, the difference is gross profit (written 'To Gross Profit c/d' on the debit side); if the debit side is larger, it is gross loss ('By Gross Loss c/d'). It is a nominal account, so it contains nominal accounts and stock (not personal accounts).

Gross profit = (Net sales + Closing stock) − (Opening stock + Net purchases + Direct expenses).

Worked example

(2 marks) Opening stock ₹20,000; purchases ₹1,00,000; wages ₹10,000; sales ₹1,60,000; closing stock ₹30,000. Find gross profit.

Try it first, then show the solutionSolution
  1. Credit side: ₹1,60,000 + ₹30,000 = ₹1,90,000 - 1 mark.
  2. Debit side: ₹20,000 + ₹1,00,000 + ₹10,000 = ₹1,30,000; GP = ₹1,90,000 − ₹1,30,000 = ₹60,000 - 1 mark.

Answer: Gross profit = ₹60,000.

Profit and Loss Account

The Profit and Loss Account is prepared to find the net profit or net loss of the business, after all indirect expenses and losses and all other incomes are considered.

Credit side (By): gross profit b/d; other incomes such as commission received, rent received, interest received, discount received.
Debit side (To): gross loss b/d (if any); office and administration expenses (salaries, office rent, printing and stationery, telephone, insurance, audit fees); selling and distribution expenses (carriage outwards, advertisement, commission paid, discount allowed, bad debts); financial expenses (interest on loan, bank charges); depreciation.

If the credit side is larger, the balancing figure is net profit ('To Net Profit transferred to Capital A/c'); otherwise net loss.

Net profit = Gross profit + Other incomes − Indirect expenses.

Worked example

(2 marks) Where are carriage inwards and carriage outwards shown? Give reasons.

Try it first, then show the solutionSolution
  1. Carriage inwards: debit of the Trading Account; it is a cost of bringing goods into the business (direct) - 1 mark.
  2. Carriage outwards: debit of the Profit and Loss Account; it is a cost of delivering goods to customers (selling, indirect) - 1 mark.

Answer: Carriage inwards is debited to the Trading Account because it is a direct cost of purchases; carriage outwards is debited to the Profit and Loss Account because it is a selling expense.

Balance Sheet

The Balance Sheet is a statement of the assets and liabilities of the business on a particular date (the last day of the year). It is not an account (no To/By) and is prepared after the Profit and Loss Account. Both sides must total the same.

Liabilities side: capital (opening capital + net profit − drawings, or − net loss); long-term loans; current liabilities: creditors (sundry creditors), bills payable, bank overdraft, outstanding items (not in syllabus).
Assets side (in order of permanence): land and buildings, plant and machinery, furniture and fittings, vehicles, investments; current assets: closing stock, debtors (sundry debtors), bills receivable, cash at bank, cash in hand.

Worked example

(2 marks) Capital ₹1,00,000; net profit ₹25,000; drawings ₹8,000. Show the capital item in the Balance Sheet.

Try it first, then show the solutionSolution
  1. Add net profit to capital: ₹1,25,000 - 1 mark.
  2. Deduct drawings: ₹1,25,000 − ₹8,000 = ₹1,17,000 on the liabilities side - 1 mark.

Answer: Capital ₹1,00,000 + Net profit ₹25,000 − Drawings ₹8,000 = ₹1,17,000, shown on the liabilities side.

Closing stock: the only adjustment

Closing stock is the value of unsold goods at the end of the year. It is usually given below the trial balance as additional information, because it is valued after the books are balanced.

When it is given outside the trial balance, it is shown twice: (1) on the credit side of the Trading Account (it reduces the cost of goods sold), and (2) on the assets side of the Balance Sheet (it is a current asset). This double treatment completes the double entry (Closing Stock A/c Dr; To Trading A/c).

Opening stock, which is in the trial balance, goes only to the debit side of the Trading Account. If closing stock appears inside the trial balance itself (rare), it goes only to the Balance Sheet.

Worked example

(1 mark) Closing stock given as an adjustment appears in:
(a) Trading Account only
(b) Balance Sheet only
(c) Trading Account and Balance Sheet
(d) Profit and Loss Account and Balance Sheet

Try it first, then show the solutionSolution
  1. An adjustment outside the trial balance is shown twice: Trading credit and Balance Sheet asset.

Answer: (c) Trading Account and Balance Sheet.

Classifying common trial balance items

Trading Account (debit): opening stock, purchases (less returns outwards), wages, carriage inwards, freight, import duty, fuel and power, factory lighting.
Trading Account (credit): sales (less returns inwards), closing stock.
Profit and Loss Account (debit): salaries, office rent, rates and taxes, insurance, printing and stationery, postage, carriage outwards, advertisement, discount allowed, bad debts, commission paid, interest paid, repairs, depreciation, general expenses.
Profit and Loss Account (credit): commission received, discount received, rent received, interest received, dividend received.
Balance Sheet liabilities: capital (with net profit added and drawings deducted), loans, creditors, bills payable, bank overdraft.
Balance Sheet assets: land, buildings, machinery, furniture, vehicles, investments, closing stock, debtors, bills receivable, cash at bank, cash in hand.

Caution: sales returns are deducted from sales, purchases returns from purchases; bills receivable are assets and bills payable liabilities; investments are assets (only income from them goes to P&L).

Worked example

(2 marks) State where each is shown: (a) bills payable; (b) discount allowed.

Try it first, then show the solutionSolution
  1. (a) Liabilities side of the Balance Sheet - 1 mark.
  2. (b) Debit side of the Profit and Loss Account - 1 mark.

Answer: (a) Bills payable: liabilities side of the Balance Sheet. (b) Discount allowed: debit side of the Profit and Loss Account.

Final Accounts of Sole Proprietorship in real life

Each concept, met in an everyday situation. Read the situation, answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Gross profit vs net profit

Suppose a stationery shop buys pens for ₹6,000 and sells them for ₹10,000 in a month, but pays ₹2,500 rent and ₹1,000 electricity for the shop.

Find the gross profit and the net profit for the month.

Try it first, then show the solutionSolution
  1. Gross profit = ₹10,000 − ₹6,000 = ₹4,000 (Trading).
  2. Indirect expenses = ₹2,500 + ₹1,000 = ₹3,500.
  3. Net profit = ₹4,000 − ₹3,500 = ₹500 (P&L).

Answer: Gross profit ₹4,000; net profit ₹500.

Memory hook: Gross from goods, net after the bills.

Closing stock

Imagine a toy shop buys toys worth ₹50,000 in a year, sells toys that cost ₹42,000 for ₹60,000, and has toys costing ₹8,000 left on the shelves (no opening stock).

Why must the ₹8,000 be credited in the Trading Account and also shown as an asset?

Try it first, then show the solutionSolution
  1. Only goods costing ₹42,000 were sold; crediting ₹8,000 reduces cost of goods sold to ₹42,000.
  2. So gross profit = ₹60,000 + ₹8,000 − ₹50,000 = ₹18,000.
  3. The unsold toys are still owned, so they are a current asset in the Balance Sheet.

Answer: Crediting closing stock gives the correct gross profit of ₹18,000; showing it as an asset records toys the shop still owns.

Memory hook: Unsold today = asset today, and not a cost this year.

Drawings

Suppose a grocer takes ₹5,000 of goods and ₹10,000 cash from the shop for his family during the year.

How are these shown in the final accounts?

Try it first, then show the solutionSolution
  1. Drawings are withdrawals for personal use, not business expenses.
  2. They are not shown in the Trading or P&L Account as expenses.
  3. ₹15,000 is deducted from capital in the Balance Sheet.

Answer: Total drawings of ₹15,000 are deducted from capital on the liabilities side; they do not reduce profit.

Memory hook: Owner takes = capital shrinks, profit unchanged.

Topics in this chapter

Final Accounts of Sole Proprietorship: key facts

Gross profit
(Net sales + Closing stock) − (Opening stock + Net purchases + Direct expenses)
Net sales = Sales − Sales returns; Net purchases = Purchases − Purchases returns.
Net profit
Gross profit + Other incomes − Indirect expenses
Transferred to capital.
Closing capital
Opening capital + Net profit − Drawings
Net loss is deducted instead of added.
Balance Sheet
Assets = Capital + Liabilities
Both sides must agree.

How the board asks Final Accounts of Sole Proprietorship

The question patterns to expect, and the method that works for each.

Question typeHow it is askedMethod
MCQ (Section A)Where closing stock appears (2024); true statements about the Trading Account (2025); where carriage inwards is posted (2025).Recall the debit/credit rule for each item and the double treatment of closing stock.
Short answer (2 marks)Two differences between the Trading Account and the Profit and Loss Account (2025); the last step of final accounts (Balance Sheet) explained (2025).Purpose and contents; identify and explain in two lines.
Full problem (10 marks, Section B)From a trial balance with closing stock, prepare the Trading Account, Profit and Loss Account and Balance Sheet (2024, 2025).Proper headings with the firm's name and date, To/By, net figures for returns, closing stock twice, net profit and drawings in capital, and both Balance Sheet totals equal.

Tricks to remember Final Accounts of Sole Proprietorship

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • Goods, Bills, Owns

    About GOODS → Trading; BILLS of running the office and selling → P&L; what it OWNS or OWES → Balance Sheet.

    Use it when: Placing any trial balance item.

  • Inwards in, outwards out

    Carriage INwards goes INto Trading (direct); carriage OUTwards goes OUT to P&L (selling).

    Use it when: The 2025 MCQ and the 10-mark question.

  • Closing stock knocks twice

    Closing stock knocks on the Trading Account (credit) and the Balance Sheet (asset).

    Use it when: Never forget the second posting.

Final Accounts of Sole Proprietorship: board-level solved questions

Ordered from board level to HOTS. Cover the solution, write your own, then compare step by step.

Example 1: Trading Account statements · 1 mark · MCQHarder board level

Which of the following are true for a Trading Account?
I. It shows opening stock on the debit side.
II. It is prepared after the Balance Sheet.
III. Its result is gross profit or gross loss.
IV. It contains personal accounts such as debtors.
(a) I and II
(b) I and III
(c) II and IV
(d) III and IV

Try it first, then show the solutionSolution
  1. I true; III true.
  2. II false (Trading is prepared first); IV false (debtors go to the Balance Sheet).

Answer: (b) I and III.

Example 2: Carriage inwards · 1 mark · MCQBoard level

Carriage inwards is posted to the:
(a) credit side of the Trading Account
(b) debit side of the Profit and Loss Account
(c) debit side of the Trading Account
(d) assets side of the Balance Sheet

Try it first, then show the solutionSolution
  1. A direct cost of purchases: debit of Trading.

Answer: (c) debit side of the Trading Account.

Example 3: Trading vs P&L Account · 2 marks · Very short answerBoard level

Write any two differences between the Trading Account and the Profit and Loss Account.

Try it first, then show the solutionSolution
  1. Purpose: gross profit/loss vs net profit/loss.
  2. Contents: direct expenses and goods items vs indirect expenses and other incomes.

Answer: (1) The Trading Account finds gross profit or loss, while the Profit and Loss Account finds net profit or loss. (2) The Trading Account records purchases, sales, stock and direct expenses such as wages, while the Profit and Loss Account records indirect expenses such as salaries and rent and other incomes such as commission received.

Example 4: Full final accounts from a trial balance · 10 marks · Long answerHarder board level

From the following trial balance of Mr Arun Mehta, prepare the Trading Account and the Profit and Loss Account for the year ended 31 March 2026 and a Balance Sheet as on that date. Closing stock on 31 March 2026 was ₹55,000.

ParticularsDr (₹)Cr (₹)
Capital 1,60,500
Drawings12,000 
Opening stock40,000 
Purchases and Sales2,10,0003,40,000
Returns6,0005,000
Wages18,000 
Carriage inwards4,000 
Salaries30,000 
Rent12,000 
Carriage outwards3,000 
Advertisement5,000 
Insurance2,000 
Discount allowed1,500 
Bad debts1,000 
Commission received 3,000
Interest received 1,500
Debtors and Creditors50,00035,000
Bills receivable and Bills payable10,0008,000
Cash in hand8,500 
Cash at bank25,000 
Furniture20,000 
Machinery80,000 
Investments15,000 
Total5,53,0005,53,000
Try it first, then show the solutionSolution
  1. Trading Account of Mr Arun Mehta for the year ended 31 March 2026:
    Dr Particulars₹Cr Particulars₹
    To Opening stock40,000By Sales 3,40,000 less Returns 6,0003,34,000
    To Purchases 2,10,000 less Returns 5,0002,05,000By Closing stock55,000
    To Wages18,000  
    To Carriage inwards4,000  
    To Gross profit c/d1,22,000  
    Total3,89,000Total3,89,000
  2. Profit and Loss Account for the year ended 31 March 2026:
    Dr Particulars₹Cr Particulars₹
    To Salaries30,000By Gross profit b/d1,22,000
    To Rent12,000By Commission received3,000
    To Carriage outwards3,000By Interest received1,500
    To Advertisement5,000  
    To Insurance2,000  
    To Discount allowed1,500  
    To Bad debts1,000  
    To Net profit (to Capital)72,000  
    Total1,26,500Total1,26,500
  3. Balance Sheet of Mr Arun Mehta as on 31 March 2026:
    Liabilities₹Assets₹
    Capital 1,60,500 + Net profit 72,000 − Drawings 12,0002,20,500Machinery80,000
    Creditors35,000Furniture20,000
    Bills payable8,000Investments15,000
      Closing stock55,000
      Debtors50,000
      Bills receivable10,000
      Cash at bank25,000
      Cash in hand8,500
    Total2,63,500Total2,63,500
  4. Check: sales returns (Dr ₹6,000) are deducted from sales; purchases returns (Cr ₹5,000) from purchases; closing stock appears in Trading and the Balance Sheet; investments are an asset; the Balance Sheet agrees.

Answer: Gross profit ₹1,22,000; net profit ₹72,000; closing capital ₹2,20,500; Balance Sheet totals ₹2,63,500 on both sides.

Example 5: Finding missing figures · 2 marks · Short answerHOTS / competency

Suppose net sales are ₹4,00,000, gross profit is 25% of net sales, opening stock is ₹60,000, net purchases are ₹3,20,000 and there are no direct expenses. Find the closing stock.

Try it first, then show the solutionSolution
  1. Gross profit = 25% × ₹4,00,000 = ₹1,00,000.
  2. Cost of goods sold = ₹4,00,000 − ₹1,00,000 = ₹3,00,000.
  3. Closing stock = Opening stock + Purchases − COGS = ₹60,000 + ₹3,20,000 − ₹3,00,000 = ₹80,000.

Answer: Closing stock = ₹80,000.

Example 6: Gross loss case · 2 marks · Short answerHarder board level

Opening stock ₹30,000; purchases ₹1,50,000; purchases returns ₹5,000; wages ₹15,000; sales ₹1,70,000; sales returns ₹4,000; closing stock ₹20,000. Calculate gross profit or gross loss and state how it is shown.

Try it first, then show the solutionSolution
  1. Credit side: (₹1,70,000 − ₹4,000) + ₹20,000 = ₹1,86,000.
  2. Debit side: ₹30,000 + (₹1,50,000 − ₹5,000) + ₹15,000 = ₹1,90,000.
  3. Debit exceeds credit by ₹4,000: gross loss.

Answer: Gross loss of ₹4,000, shown as 'By Gross loss c/d' on the credit side of the Trading Account and 'To Gross loss b/d' on the debit side of the Profit and Loss Account.

Example 7: Why closing stock is posted twice · 5 marks · Long answerHOTS / competency

Explain why closing stock given outside the trial balance is shown in two places, while opening stock is shown only once.

Try it first, then show the solutionSolution
  1. Closing stock is an adjustment not yet recorded in the ledger.
  2. Double entry: Closing Stock A/c Dr, Trading A/c Cr.
  3. Trading credit reduces cost of goods sold so gross profit is correct.
  4. Closing Stock A/c balance is an asset shown in the Balance Sheet.
  5. Opening stock is already a ledger balance in the trial balance (its double entry is complete), so it is shown once, in Trading debit.

Answer: Closing stock is valued after the trial balance is prepared, so its double entry is made through the final accounts: crediting the Trading Account removes the cost of unsold goods from the cost of goods sold, giving the correct gross profit, and the matching debit (Closing Stock A/c) is an asset shown in the Balance Sheet. Opening stock is already in the trial balance with its double entry complete, so it is shown only once, on the debit side of the Trading Account.

Case-study practice (Section B style)

Read the situation, then answer every part. In the board paper this is a 10-mark question split into 2 + 3 + 5 marks.

Ms Fernandes' boutique

Imagine Ms Fernandes runs a boutique. Her trial balance includes: opening stock ₹25,000; purchases ₹1,20,000; sales ₹2,00,000; carriage inwards ₹3,000; carriage outwards ₹2,000; salaries ₹24,000; rent received ₹6,000; drawings ₹10,000; capital ₹1,00,000. Closing stock is ₹35,000.

  1. (i) · 2 marks

    Calculate the gross profit.

    Answer

    Answer: (₹2,00,000 + ₹35,000) − (₹25,000 + ₹1,20,000 + ₹3,000) = ₹2,35,000 − ₹1,48,000 = ₹87,000.

    Correct sides 1 mark; answer 1 mark.

  2. (ii) · 3 marks

    Calculate the net profit.

    Answer

    Answer: ₹87,000 + ₹6,000 − (₹2,000 + ₹24,000) = ₹67,000.

    Rent received added 1 mark; expenses deducted 1 mark; answer 1 mark.

  3. (iii) · 5 marks

    Show the capital item in the Balance Sheet, and state where carriage outwards, rent received and closing stock are shown.

    Answer

    Answer: Capital ₹1,00,000 + Net profit ₹67,000 − Drawings ₹10,000 = ₹1,57,000 on the liabilities side. Carriage outwards: debit of P&L. Rent received: credit of P&L. Closing stock: credit of Trading Account and assets side of the Balance Sheet.

    Capital 2 marks; placements 1 mark each.

Where the marks are

How a typical answer is split into step marks. Show every step: a right final answer alone rarely earns full marks.

Write any two differences between the Trading Account and the Profit and Loss Account. (2 marks) (2 marks)

StepMarks
Purpose: gross vs net profit.1
Contents: direct vs indirect expenses and other incomes.1

Calculate net profit and closing capital from given figures. (5 marks) (5 marks)

StepMarks
Gross profit computed correctly.1
Other incomes added.1
Indirect expenses deducted; net profit.1
Net profit added to opening capital.1
Drawings deducted; closing capital.1

Where students lose marks in Final Accounts of Sole Proprietorship

The slips examiners see most often, and what to write instead.

  • Mistake: Wrong format and headings

    The 2024 and 2025 examiners reported missing headings, no To/By, and entries posted without amounts.

    Do this: Head each account with the trader's name and 'for the year ended ...'; the Balance Sheet 'as on ...'; use To/By in accounts only.

    Usually costs: Up to 2 marks of 10.

  • Mistake: Closing stock shown only once

    The 2024 MCQ and both 10-mark questions found candidates leaving it out of the Balance Sheet.

    Do this: Closing stock outside the trial balance: Trading credit and Balance Sheet asset.

    Usually costs: 1 to 2 marks, and the Balance Sheet will not agree.

  • Mistake: Carriage inwards and outwards both in P&L

    The 2025 examiners reported this confusion.

    Do this: Inwards = Trading (direct); outwards = P&L (selling).

    Usually costs: 1 mark.

  • Mistake: Interchanging pairs given on one line

    In 2024 and 2025 candidates swapped sales and purchases returns, debtors and creditors, and bills receivable and payable.

    Do this: In a combined line, the debit figure always belongs to the asset or expense: debtors (Dr), creditors (Cr); bills receivable (Dr), bills payable (Cr); sales returns (Dr), purchases returns (Cr).

    Usually costs: 1 mark each pair.

  • Mistake: Drawings not deducted from capital

    The 2025 examiners noted this in the Balance Sheet.

    Do this: Capital + net profit − drawings.

    Usually costs: 1 mark.

Practice questions on Final Accounts of Sole Proprietorship

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    Closing stock given as an adjustment is shown on the:
    (a) debit side of the Trading Account and liabilities side
    (b) credit side of the Trading Account and assets side
    (c) credit side of the P&L Account only
    (d) assets side only

    Hint

    Twice.

    Answer

    (b) credit side of the Trading Account and assets side.

  2. Q2 · 1 mark · MCQBoard level

    Drawings are:
    (a) debited to the P&L Account
    (b) added to capital
    (c) deducted from capital in the Balance Sheet
    (d) shown on the assets side

    Hint

    Owner's withdrawal.

    Answer

    (c) deducted from capital in the Balance Sheet.

  3. Q3 · 2 marks · Very short answerHarder board level

    What is a Balance Sheet? Why is it called a statement and not an account?

    Hint

    No To/By.

    Answer

    A Balance Sheet is a statement of the assets and liabilities of a business on a particular date. It is a statement, not an account, because it lists balances of accounts on a date without debit/credit (To/By) entries and is not part of the double-entry ledger.

  4. Q4 · 2 marks · Very short answerBoard level

    State where each is shown: (a) bills receivable; (b) wages; (c) discount received; (d) investments.

    Hint

    Assets, Trading, P&L.

    Answer

    (a) Assets side of the Balance Sheet. (b) Debit side of the Trading Account. (c) Credit side of the P&L Account. (d) Assets side of the Balance Sheet.

  5. Q5 · 2 marks · Short answerHarder board level

    Net purchases ₹2,40,000; opening stock ₹30,000; closing stock ₹50,000; wages ₹20,000; net sales ₹3,00,000. Find gross profit and its percentage on net sales.

    Hint

    Cost of goods sold first.

    Answer

    Cost of goods sold = ₹30,000 + ₹2,40,000 + ₹20,000 − ₹50,000 = ₹2,40,000. Gross profit = ₹3,00,000 − ₹2,40,000 = ₹60,000, which is 20% of net sales.

  6. Q6 · 2 marks · Short answerBoard level

    Gross profit ₹90,000; salaries ₹30,000; rent paid ₹12,000; commission received ₹4,000; carriage outwards ₹2,000; bad debts ₹1,500. Find net profit.

    Hint

    Add income, deduct expenses.

    Answer

    Net profit = ₹90,000 + ₹4,000 − (₹30,000 + ₹12,000 + ₹2,000 + ₹1,500) = ₹94,000 − ₹45,500 = ₹48,500.

  7. Q7 · 5 marks · Long answerHarder board level

    Prepare the Trading Account from: opening stock ₹15,000; purchases ₹85,000; returns outwards ₹3,000; sales ₹1,40,000; returns inwards ₹2,000; carriage inwards ₹1,500; wages ₹6,500; closing stock ₹22,000.

    Hint

    Net purchases and net sales.

    Answer

    Debit: To Opening stock ₹15,000; To Purchases ₹85,000 less returns ₹3,000 = ₹82,000; To Carriage inwards ₹1,500; To Wages ₹6,500 (₹1,05,000 so far); To Gross profit c/d ₹55,000. Credit: By Sales ₹1,40,000 less returns ₹2,000 = ₹1,38,000; By Closing stock ₹22,000. Both totals ₹1,60,000; gross profit ₹55,000.

  8. Q8 · 2 marks · Very short answerHOTS / competency

    Suppose a student shows closing stock only in the Trading Account. Explain the effect on gross profit and on the Balance Sheet.

    Hint

    Assets side.

    Answer

    Gross profit is correct because the Trading credit is made, but the Balance Sheet will not agree: the assets side is short by the value of closing stock, since an asset the business owns has been left out.

  9. Q9 · 5 marks · Long answerHOTS / competency

    A student puts investments of ₹15,000 in the Profit and Loss Account and bills payable on the assets side. Explain both errors and correct them.

    Hint

    Assets vs incomes; payable = owe.

    Answer

    Investments are assets owned by the business; only the income from them (interest or dividend) goes to the credit of the P&L Account. So ₹15,000 should be shown on the assets side of the Balance Sheet. Bills payable are amounts the business owes on bills accepted, so they are a liability and belong on the liabilities side. Both errors also make the Balance Sheet disagree.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.Which account shows gross profit?Show answer

    The Trading Account.

  2. 2.Where is opening stock shown?Show answer

    Debit side of the Trading Account.

  3. 3.Where is carriage outwards shown?Show answer

    Debit side of the P&L Account.

  4. 4.Where are drawings shown?Show answer

    Deducted from capital on the liabilities side.

  5. 5.Is bills receivable an asset or a liability?Show answer

    An asset.

Best order to study it

  1. Meaning of final accounts and their order.
  2. Trading Account: items and gross profit.
  3. Profit and Loss Account: items and net profit.
  4. Balance Sheet: order of assets and liabilities; capital adjustment.
  5. Closing stock double treatment.
  6. Practise one full trial balance problem every week.

Quick revision checklist

The night before the exam: can you do each of these without looking?

  • Order: Trading → P&L → Balance Sheet.
  • Trading: stock, purchases, sales, returns, wages, carriage inwards → gross profit.
  • P&L: indirect expenses and other incomes → net profit.
  • Balance Sheet: capital + NP − drawings, liabilities; assets incl. closing stock.
  • Closing stock (adjustment): Trading credit + Balance Sheet asset.
  • Excluded: manufacturing account, sale of assets, intangible/fictitious assets, prepaid/accrued items.

Final Accounts of Sole Proprietorship: frequently asked questions

Do I need to adjust outstanding or prepaid expenses?

No. The 2027 syllabus allows only the closing stock adjustment; prepaid and accrued expenses and incomes are excluded.

Can I show the Balance Sheet in vertical form?

The horizontal form (liabilities left, assets right) is standard in ICSE answers; use it with clear headings.

What if the trial balance gives 'Returns' on one line with two figures?

The debit figure is sales returns (returns inwards) and the credit figure is purchases returns (returns outwards).

Based on: CISCE ICSE 2027 Commercial Studies syllabus; CISCE ICSE 2025 Specimen Question Paper and Marking Scheme, Commercial Studies (631)