MODULE 4: PREPARATION OF TRIAL BALANCE & FINANCIAL STATEMENTS

An Exhaustive Academic Reference: Arithmetical Verification, Classification of Accounting Errors, Capital vs. Revenue Expenditures, Trading & Profit and Loss Account & Sole Proprietor Balance Sheet Marshalling

Module Structure & Learning Outcomes (Syllabus Hours: 9 + Open Ended Module: 9 | Total 18 Hours)

This module provides commerce students with the complete theoretical and practical framework required to verify accounting accuracy and construct final financial statements. Key learning outcomes include:

Unit 4.1: Preparation and Theory of the Trial Balance: Meaning, objectives, formats (Totals Method vs. Balances Method), arithmetical accuracy vs. conclusive proof of accuracy, and limitations of trial balance.
Unit 4.2: Classification and Rectification of Accounting Errors: Errors of Omission (complete vs. partial), Errors of Commission, Errors of Principle, Compensating Errors, and the mechanics of the Suspense Account.
Unit 4.3: Capital and Revenue Distinction Architecture: Capital Expenditure vs. Revenue Expenditure vs. Deferred Revenue Expenditure, test criteria, Capital Receipts vs. Revenue Receipts, and operating impact of misclassification.
Unit 4.4: Preparation of Financial Statements & The Trading Account: The accounting cycle culmination, purpose of Trading Account, direct expenses (wages, carriage inward, factory power, customs duty), cost of goods sold (COGS), and Gross Profit/Loss calculation.
Unit 4.5: The Profit and Loss Account: Purpose, indirect operating expenses (administrative, selling, distribution), non-operating incomes, and Operating Profit vs. Net Profit/Loss calculation.
Unit 4.6: Open-Ended Module: Balance Sheet of a Sole Proprietor: Purpose, nature as a statement (not an account), marshalling and grouping of assets and liabilities (Order of Liquidity vs. Order of Permanence), and treatment of capital, net profit, and drawings.
Comprehensive Worked Practical Problem: End-to-end numerical problem preparing the Trading Account, Profit & Loss Account, and Balance Sheet from an adjusted trial balance.
Empirical Corporate Case Studies: The Olympus Corporation "Tobashi" Fraud, Carillion Plc Capitalization Scandal, and Reliance Industries Schedule III Financial Reporting Benchmark.
University Examination Vault: Curated Calicut University exam questions categorized into Part A (Conceptual Short Answers), Part B (Paragraph Analytical Essays), and Part C (Comprehensive Long Essays & Practical Problems).

Unit 4.1: Preparation and Theoretical Architecture of the Trial Balance

1. Meaning and Objectives of the Trial Balance

Under the fundamental duality concept of the double entry system, every transaction has an equal debit and credit effect. Therefore, if all transactions have been accurately journalized and posted to the ledger, the aggregate of all debit balances across the general ledger must precisely equal the aggregate of all credit balances.

A Trial Balance is a statement prepared with the debit and credit balances of ledger accounts at a specific point in time (usually at the end of the accounting fiscal year or at monthly intervals) to establish the arithmetical accuracy of the books of accounts and provide the foundation for preparing the final financial statements.

2. Objectives and Practical Utility

Verifying Arithmetical Accuracy: The primary objective is to verify that debits equal credits in the ledger, identifying clerical slips and unilateral omission errors.
Facilitating Financial Statement Preparation: It provides a consolidated summary of all ledger balances on a single page, eliminating the need to search through hundreds of individual ledger accounts to draft the Trading, Profit & Loss Account and Balance Sheet.
Facilitating Error Detection & Audit: Any failure of the Trial Balance to agree triggers an immediate audit investigation through the mechanism of a Suspense Account.

3. Methods of Preparing the Trial Balance

Method Name	Procedural Execution	Practical Commercial Evaluation
1. Balances Method (Standard Method)	Only the net closing balance (Debit or Credit) of each ledger account is extracted and recorded in the respective debit or credit column.	Universally adopted in modern accounting and automated ERP systems; directly feeds into financial statements.
2. Totals Method (Gross Trial Balance)	The gross total of debit postings and the gross total of credit postings of each ledger account are entered without balancing.	Rarely used in practice; cumbersome; does not assist in drafting the Balance Sheet or Income Statement directly.
3. Compound (Totals & Balances) Method	Contains four amount columns: two for gross totals (debit & credit) and two for net balances (debit & credit).	Highly complex and time-consuming; utilized occasionally for deep forensic reconciliations.

Unit 4.2: Classification and Rectification of Accounting Errors & The Suspense Account

1. Is the Agreement of a Trial Balance Conclusive Proof of Accuracy?

A vital theoretical principle in accounting asserts that: "The agreement of a Trial Balance is prima facie evidence, but NOT conclusive proof of absolute accounting accuracy." A trial balance proves only that total debits equal total credits. It cannot detect errors where compensating mistakes have occurred or where fundamental accounting principles have been violated.

2. Taxonomy of Accounting Errors

Error Classification	Nature & Practical Illustration	Impact on Trial Balance Agreement
1. Errors of Principle	Violating fundamental GAAP rules by confusing capital and revenue items (e.g., debiting Machinery Repair to Machinery Account, or debiting Office Furniture purchase to Purchases Account).	Does NOT affect Trial Balance agreement. Debits still equal credits; error remains hidden.
2. Complete Errors of Omission	A transaction is completely omitted from the journal, or a journal entry is never posted to any ledger account (e.g., credit purchase of ₹10,000 from Anand completely forgotten).	Does NOT affect Trial Balance agreement. Both sides are equally understated.
3. Compensating Errors	Two or more independent errors cancel each other out (e.g., Ram's account over-debited by ₹500, and Shyam's account over-credited by ₹500).	Does NOT affect Trial Balance agreement. The algebraic sum of errors is zero.
4. Errors of Commission (One-Sided)	Posting to the wrong side of an account, wrong casting (totaling) of subsidiary books, or writing the wrong amount on one side (e.g., Purchases Book undercast by ₹1,000).	DISCLOSES DISAGREEMENT. Debit total will not equal credit total.
5. Partial Errors of Omission	A transaction is recorded in the journal, but posted to one ledger account while omitted from the corresponding ledger account.	DISCLOSES DISAGREEMENT. Trial balance will not balance.

3. The Suspense Account Architecture

When a Trial Balance fails to agree and immediate rectifications cannot be located before year-end reporting deadlines, the accountant inserts an artificial balancing figure known as the Suspense Account:

If total debits exceed credits, the difference is credited to Suspense A/c (appearing on the Liabilities side of the provisional balance sheet).
If total credits exceed debits, the difference is debited to Suspense A/c (appearing on the Assets side of the provisional balance sheet).
As individual errors are systematically traced and rectified through journal entries, they are debited or credited against the Suspense Account until its balance becomes zero and the account is closed.

Unit 4.3: Capital and Revenue Distinction Architecture

1. Conceptual Importance of Capital vs. Revenue Demarcation

Accurately distinguishing between capital and revenue expenditures is the cornerstone of sound accounting. A failure to distinguish between the two distorts financial reporting:

If a Capital Expenditure is treated as a Revenue Expenditure, current year profits are artificially understated, and fixed assets on the balance sheet are understated.
If a Revenue Expenditure is treated as a Capital Expenditure, current year profits are artificially inflated (overstated), and assets are overvalued (a technique exploited in corporate accounting scandals).

2. In-Depth Comparative Dissection

Comparative Feature	Capital Expenditure	Revenue Expenditure	Deferred Revenue Expenditure
Core Purpose	Acquiring fixed assets, extending productive capacity, or lowering operating costs permanently.	Maintaining existing operational assets in working condition; routine business operations.	Revenue in nature, but yielding economic benefit over several fiscal periods (3 to 5 years).
Duration of Benefit	Endures across multiple accounting periods (long-term, > 1 year).	Exhausted completely within the current accounting period (≤ 1 year).	Extends across multiple periods (medium-term, 3-5 years).
Financial Statement Placement	Capitalized on the Balance Sheet under Non-Current Fixed Assets.	Charged directly to Trading or Profit & Loss Account as an operational expense.	Unexpired portion shown as an Asset on Balance Sheet; expired portion charged to P&L.
Practical Examples	Purchasing factory land; building extensions; installation charges of new machinery; patents.	Factory wages; office salaries; machine repair and lubrication; electricity bills; store rent.	Massive launch advertising campaign for a new consumer product; heavy preliminary expenses.

3. Capital Receipts vs. Revenue Receipts

Capital Receipts: Non-recurring receipts not arising from ordinary commercial operations. Examples: Capital introduced by owners, long-term loans raised from banks, sale proceeds of old fixed assets. Shown on the Balance Sheet (as Liabilities or reductions in Assets).
Revenue Receipts: Routine receipts arising from normal business operations. Examples: Sale of merchandise inventory, interest received on bank deposits, commission earned. Credited to the Trading and Profit & Loss Account.

Unit 4.4 & 4.5: Financial Statements: Preparation of Trading and Profit & Loss Account

1. The Trading Account: Ascertaining Gross Operational Performance

The Trading Account is the first stage of the final financial statements. Its primary objective is to determine the Gross Profit or Gross Loss resulting strictly from the manufacturing, purchasing, and direct handling of merchandise:

Core Mathematical Relationships in the Trading Account

Cost of Goods Sold (COGS) = Opening Stock + Net Purchases + Direct Expenses - Closing Stock

Gross Profit = Net Sales - Cost of Goods Sold (COGS)

Direct Expenses encompass all expenditures incurred to bring goods into the business premises or factory ready for sale: Factory Wages, Freight & Carriage Inward, Import Customs Duties, Coal, Gas, Water & Factory Fuel, and Factory Power.

2. The Profit and Loss Account: Ascertaining Net Bottom-Line Income

The Profit and Loss Account commences with the Gross Profit (credited) or Gross Loss (debited) brought down from the Trading Account. It incorporates all indirect operational expenses, administrative overheads, selling and distribution costs, and financial charges to ascertain the final Net Profit or Net Loss:

Items Debited (Indirect Expenses):
1. Administrative Expenses: Office salaries, office rent, printing & stationery, postage, legal fees, audit fees.
2. Selling & Distribution Expenses: Carriage outward, salesmen's salaries, advertising, packing expenses, warehouse rent.
3. Financial & Maintenance Charges: Bank interest on loans, discount allowed, bad debts, depreciation on assets, repair of office equipment.
Items Credited (Indirect & Non-Operating Incomes): Discount received, commission earned, bank interest received, rent from subletting, profit on sale of old investments.
Net Profit Transfer: The balancing figure (Net Profit) is transferred directly to the proprietor's Capital Account on the Balance Sheet.

Unit 4.6: Open-Ended Module: Preparation of Balance Sheet of a Sole Proprietor

1. Nature and Characteristics of the Balance Sheet

The Balance Sheet is a classified summary statement of the financial position of an enterprise on a specific calendar date (usually 31st March). It is fundamentally distinct from a ledger account:

It is a Statement, not an account (hence, it contains no "To" or "By" prefixes, and no Debit or Credit columns).
It shows the financial position at a specific point in time (snapshot), rather than over a period of time.
It proves the fundamental accounting equation: $Total Assets = Total Liabilities + Owner’s Capital$ .

2. Marshalling and Grouping of Assets and Liabilities

Marshalling refers to the structural arrangement of assets and liabilities in a specific, standardized order on the face of the Balance Sheet. There are two recognized methods of marshalling:

Marshalling Method	Order of Assets	Order of Liabilities
1. Order of Liquidity (Favored by sole traders & partnership firms)	Arranged according to ease of conversion into cash: 1. Cash in Hand 2. Cash at Bank 3. Marketable Investments 4. Bills Receivable & Debtors 5. Closing Stock 6. Furniture, Plant & Machinery 7. Land & Buildings, Goodwill.	Arranged according to urgency of discharge: 1. Short-Term Bank Overdraft 2. Bills Payable & Sundry Creditors 3. Outstanding Expenses 4. Long-Term Bank Loans / Mortgages 5. Proprietor’s Capital (Permanent).
2. Order of Permanence (Mandatory for corporate joint-stock companies under Companies Act)	Arranged in exact reverse order: Most permanent, illiquid fixed assets appear first (Goodwill, Land, Plant), followed down to liquid cash assets.	Most permanent internal obligations appear first (Proprietor's Capital, Long-term Debentures), followed down to short-term current liabilities.

Comprehensive Worked Practical Numerical Problem

Full Final Accounts Numerical Illustration

From the following Trial Balance extracted from the books of Shri Rajesh as on 31st March 2026, prepare the Trading Account, Profit and Loss Account for the year ended 31st March 2026, and the Balance Sheet as on that date:

TRIAL BALANCE OF SHRI RAJESH AS ON 31ST MARCH 2026
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Particulars / Heads of Accounts                         | Debit (₹)  | Credit (₹)
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Capital Account                                         |           |  1,50,000
Drawings Account                                        |    10,000 |
Plant and Machinery                                     |    80,000 |
Office Furniture                                        |    15,000 |
Opening Stock (1st April 2025)                          |    40,000 |
Purchases and Sales                                     |  1,60,000 |  2,80,000
Returns Inward and Returns Outward                      |     4,000 |     3,000
Factory Wages                                           |    22,000 |
Carriage Inward                                        |     3,500 |
Salaries (Office)                                      |    18,000 |
Rent, Rates and Taxes                                   |     6,000 |
Carriage Outward                                       |     2,500 |
Discount Allowed and Discount Received                  |     1,200 |     1,800
Sundry Debtors and Sundry Creditors                     |    52,000 |    35,000
Cash in Hand and Cash at Bank                           |    24,600 |
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TOTAL                                                   |  4,36,800 |  4,36,800
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Note: Value of Closing Stock as on 31st March 2026 was verified at ₹45,000.

Solution Statements:

TRADING AND PROFIT & LOSS ACCOUNT OF SHRI RAJESH FOR THE YEAR ENDED 31ST MARCH 2026
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Particulars                                | Amount (₹) | Particulars                                | Amount (₹)
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To Opening Stock                           |    40,000 | By Sales (2,80,000 - Ret. 4,000)          |  2,76,000
To Purchases (1,60,000 - Ret. 3,000)      |  1,57,000 | By Closing Stock                           |    45,000
To Factory Wages                           |    22,000 |                                           |
To Carriage Inward                         |     3,500 |                                           |
To Gross Profit c/d (Transferred to P&L)  |    98,500 |                                           |
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                                          |  3,21,000 |                                           |  3,21,000
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To Salaries (Office)                       |    18,000 | By Gross Profit b/d                        |    98,500
To Rent, Rates and Taxes                   |     6,000 | By Discount Received                        |     1,800
To Carriage Outward                        |     2,500 |                                           |
To Discount Allowed                        |     1,200 |                                           |
To Net Profit c/d (Transferred to Capital) |    72,600 |                                           |
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                                          |  1,00,300 |                                           |  1,00,300
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BALANCE SHEET OF SHRI RAJESH AS ON 31ST MARCH 2026 (IN ORDER OF PERMANENCE)
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Liabilities                                | Amount (₹) | Assets                                     | Amount (₹)
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Capital Account:                         |            | Fixed Assets:                                |
Opening Balance:              1,50,000   |            | Plant and Machinery                         |    80,000
Add: Net Profit:                72,600   |            | Office Furniture                            |    15,000
                              --------   |            |                                            |
                              2,22,600   |            | Current Assets:                              |
Less: Drawings:               (10,000)   |  2,12,600  | Closing Stock                               |    45,000
                                          |            | Sundry Debtors                              |    52,000
Current Liabilities:                      |            | Cash in Hand and at Bank                     |    24,600
Sundry Creditors                          |    35,000  |                                           |
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TOTAL                                     |  2,47,600  | TOTAL                                       |  2,47,600
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Advanced Practical Application: Error Rectification & Suspense Account Ledger

A bookkeeper preparing the Trial Balance of M/s Horizon Enterprises found a discrepancy where the debit side exceeded the credit side by ₹4,820. He placed this difference in a newly opened Suspense Account to balance the books temporarily. Subsequently, the following errors were detected and investigated:

Error (a): The total of the Sales Day Book for November was undercast by ₹3,000.
Error (b): Goods returned by a customer, Mr. Arun, valued at ₹1,200 were duly entered in the Returns Inward Book, but completely omitted to be posted to his personal account in the ledger.
Error (c): A purchase of office furniture worth ₹8,500 was wrongly recorded in the Purchases Day Book and posted to the Purchases Account.
Error (d): Discount received of ₹620 from a creditor was posted to the debit of the Discount Allowed Account.
Error (e): A cash receipt of ₹2,500 from a customer, M/s Kavitha Traders, was posted to her account as ₹250.

Rectifying Journal Entries:

Date / No.	Particulars & Technical Narration	Debit (₹)	Credit (₹)
Entry (a)	Suspense Account Dr. To Sales Account (Being undercasting of Sales Day Book corrected by crediting Sales Account and debiting Suspense)	3,000	3,000
Entry (b)	Suspense Account Dr. To Arun's Account (Being omission of posting to customer's personal account rectified)	1,200	1,200
Entry (c)	Office Furniture Account Dr. To Purchases Account (Being error of principle rectified: capital asset furniture purchased wrongly debited to revenue Purchases Account)	8,500	8,500
Entry (d)	Suspense Account Dr. To Discount Allowed Account To Discount Received Account (Being discount received wrongly debited to discount allowed now rectified via double correction)	1,240	620 620
Entry (e)	Suspense Account Dr. To Kavitha Traders Account (Being short credit of ₹2,250 (₹2,500 - ₹250) in customer's account rectified)	2,250	2,250

Ledger Account: Suspense Account in the Books of M/s Horizon Enterprises

Comprehensive Master Problem: Final Accounts with Year-End Adjustments

From the following Trial Balance of M/s Apex Commercials as on 31st March 2026, prepare the Trading Account, Profit & Loss Account for the year ended 31st March 2026, and the Balance Sheet as on that date in the Order of Liquidity:

Additional Adjustments at Year-End (31-03-2026):

Closing Stock physically valued at ₹62,000 on 31st March 2026.
Outstanding Administrative Salaries amounted to ₹3,000; Outstanding Manufacturing Wages amounted to ₹2,000.
Prepaid Insurance unexpired on 31st March 2026 was ₹600.
Provide depreciation at 10% per annum on Plant & Machinery and 5% per annum on Furniture.
Create a Provision for Doubtful Debts at 5% on Sundry Debtors.
Interest on 10% Bank Loan is outstanding for 6 months (from 1st October 2025 to 31st March 2026 = ₹50,000 × 10% × 6/12 = ₹2,500).

TRADING AND PROFIT & LOSS ACCOUNT OF M/S APEX COMMERCIALS FOR THE YEAR ENDED 31ST MARCH 2026
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Particulars                                | Amount (₹) | Particulars                                | Amount (₹)
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To Opening Stock                           |    55,000 | By Sales (3,90,000 - Returns 6,000)       |  3,84,000
To Purchases (2,10,000 - Ret. 4,000)      |  2,06,000 | By Closing Stock                           |    62,000
To Carriage Inward                         |     4,800 |                                           |
To Wages (28,000 + O/s 2,000)             |    30,000 |                                           |
To Gross Profit c/d                       |  1,50,200 |                                           |
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                                          |  4,46,000 |                                           |  4,46,000
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To Salaries (24,000 + O/s 3,000)          |    27,000 | By Gross Profit b/d                        |  1,50,200
To Rent & Taxes                           |     9,600 | By Commission Received                     |     3,200
To Insurance (3,600 - Prepaid 600)        |     3,000 |                                           |
To Carriage Outward                        |     3,200 |                                           |
To Bad Debts (1,800 + New Prov. 3,600     |            |                                           |
    - Old Prov. 1,500)                    |     3,900 |                                           |
To Depreciation:                          |            |                                           |
    Plant & Machinery (10% of 1,40,000)   |    14,000 |                                           |
    Furniture (5% of 30,000)             |     1,500 |                                           |
To Outstanding Interest on Bank Loan      |     2,500 |                                           |
To Net Profit c/d (Transferred to Capital) |    87,700 |                                           |
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                                          |  1,53,400 |                                           |  1,53,400
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Empirical Corporate Case Studies

Case Study 1: The Olympus Corporation "Tobashi" Fraud (Japan, 2011)

Context & Breakdown: Olympus Corporation, a global optical instrument leader, concealed $1.7 billion in securities investment losses across two decades using an illegal Japanese practice known as Tobashi (flying away/hiding losses).

Accounting Violation Analysis: To prevent the recognition of investment losses on its published Income Statement, executives transferred degraded assets at inflated book values to off-balance-sheet shell funds. Later, Olympus bought back worthless shell companies disguised as "acquisition goodwill" and advisory fees, treating deferred capital losses as capital assets. When newly appointed British CEO Michael Woodford blew the whistle, the trial exposed how manipulating capital versus revenue definitions can compromise audit integrity.

Case Study 2: Carillion Plc (UK, 2018) — Aggressive Capital Expenditure Deferrals

Context & Breakdown: Carillion was the UK's second-largest construction and government outsourcing conglomerate, employing 43,000 people. It suddenly collapsed into compulsory liquidation in January 2018 with debts exceeding £1.5 billion.

Accounting Violation Analysis: British parliamentary investigations revealed that Carillion manipulated its Profit & Loss Account by aggressively misclassifying operational contract losses as "deferred contract receivables" on its Balance Sheet, capitalizing routine construction expenditures. By artificially delaying the recognition of revenue expenses and under-providing for non-performing receivables, Carillion reported fictitious profits and paid massive executive bonuses right until its liquidity reserve abruptly evaporated.

Case Study 3: Reliance Industries Limited (RIL) — Ind AS Schedule III Presentation Benchmark

Context & Breakdown: With India's largest market capitalization, RIL demonstrates the gold standard in balance sheet marshalling and capital expenditure accounting under Ind AS Schedule III.

Reporting Rigor: In its financial disclosures, RIL meticulously segregates Capital Work-in-Progress (CWIP) from active Plant & Machinery, disclosing detailed aging schedules for mega-refinery expansions in Jamnagar and 5G telecommunication networks in Jio. By providing transparent footnotes on revenue receipts, government grants, and capital borrowing costs, RIL maintains top-tier global credit ratings and sovereign investor confidence.

University Examination Vault: COM2FM106 (3) • Module 4

Curated for University of Calicut B.Com Examinations under CUFYUGP 2024 regulations.

Define a Trial Balance. State its primary objective.
Why is the agreement of a Trial Balance not conclusive proof of accounting accuracy?
What is an Error of Principle? Give an example.
Explain the term Compensating Error.
What is a Suspense Account? When is it opened?
Distinguish between Capital Expenditure and Revenue Expenditure.
What is Deferred Revenue Expenditure? Cite an example.
Define Cost of Goods Sold (COGS). State its formula.
Distinguish between Carriage Inward and Carriage Outward. Where are they recorded in final accounts?
What is meant by Marshalling of a Balance Sheet?
Distinguish between Order of Liquidity and Order of Permanence.
Why is Closing Stock shown outside the Trial Balance as an adjustment?
What is the difference between Gross Profit and Net Profit?
State any two errors that do not affect the agreement of a Trial Balance.

Explain the various methods of preparing a Trial Balance. Which method is most popular and why?
Classify accounting errors into those which affect the Trial Balance and those which do not affect it.
Detail the rules and procedure for operating and closing a Suspense Account upon error rectification.
State with clear theoretical reasons whether the following expenditures are Capital, Revenue, or Deferred Revenue:
- ₹25,000 spent on dismantling and transporting an old machine to a new factory site.
- ₹5,000 spent on annual whitewashing and repainting of the existing office building.
- ₹2,00,000 spent on heavy television advertising to launch a new product line.
- ₹10,000 paid as compensation to an injured factory workman.
- ₹50,000 paid for legal fees to acquire clear title deeds for purchased factory land.
Explain the structure and significance of the Trading Account. Enumerate four direct expenses debited to it.
Distinguish between a Trial Balance and a Balance Sheet across five critical dimensions.
Discuss the classification of assets and liabilities on the Balance Sheet of a sole proprietor in the Order of Permanence.

Comprehensive Theory Essay: "Final Financial Statements represent the ultimate mirror of a firm's operational health and economic net worth, but their truthfulness relies entirely on the rigorous segregation of capital and revenue items." Critically analyze this statement. Detail the objectives, direct versus indirect costs, structure of Trading and Profit & Loss Accounts, and the principles of marshalling the Balance Sheet with illustrative proformas.
Comprehensive Practical Numerical Problem: The following balances are extracted from the ledger of M/s Green Enterprises as on 31st December 2025:
Opening Stock ₹65,000; Purchases ₹2,40,000; Sales ₹4,10,000; Purchases Returns ₹5,000; Sales Returns ₹8,000; Factory Wages ₹30,000; Carriage Inward ₹4,500; Office Rent ₹14,000; Insurance ₹3,600; Advertising ₹12,000; Discount Received ₹2,400; Bad Debts ₹2,100; Sundry Debtors ₹80,000; Sundry Creditors ₹45,000; Plant & Machinery ₹1,20,000; Furniture ₹25,000; Cash at Bank ₹36,200; Drawings ₹15,000; Capital ₹1,93,000.
Closing Stock on 31st December 2025 was valued at ₹52,000.
Required: Prepare the Trading Account, Profit and Loss Account for the year ended 31st December 2025, and the Balance Sheet as on that date in the Order of Liquidity.