22 
BULLETIN 225, U. S. DEPARTMENT OF AGRICULTURE. 
To bring the new inventory into the accounts the Inventory account 
is debited and the Trading Account credited for goods on hand at 
the close of the period. A credit balance appearing on the Trading 
Account would then measure the gross profit from merchandise and a 
debit balance would measure the gross loss. This balance is trans- 
ferred to the Profit and Loss account by a journal entry. When 
these entries have been made, the Trading Account will appear as 
follows : 
Trading Account. 
Inventory as at beginning of 
year $3, 000. 00 
Purchases 13, 000. 00 
Profit and Loss 1, 000. 00 
17. 000. 00 
Sales $15, 000. 00 
Inventory as at close of year. . 2, 000. 00 
17, 000. 00 
While apparently there is little difference between the Trading 
Account and the Merchandise account as previously shown, it wiU 
be understood that the purchases and sales are shown in the copy of 
the Merchandise account in total for illustrative purposes only, and 
they do not appear in this form in actual operation. The Trading 
Account, however, shows in total the component elements which 
make up the gross profit on sales, so that it can be viewed as a whole. 
To close the nominal accounts, that is, the accounts containing 
profit and loss elements, into the Profit and Loss account, two 
journal entries are made: The first for all expense accounts and 
other nominal accounts showing debit balances, and the second for all 
nominal accounts showing credit balances. The first of the entries 
is as follows : 
Profit and Loss $4, 300. 00 
To Expense $4,000.00 
Interest 200.00 
Reserve for deprecia- 
tion of building 100. 00 
The second entry is as follows: 
Fruit Profit and Loss. $300. 00 
Commission 5, 000. 00 
To Profit and Loss $5, 300. 00 
When all entries are posted to the Profit and Loss account this 
account will appear as follows: 
Profit and Loss Account. 
Expense $4,000.00 
Interest 200. 00 
Reserve for depreciation of 
building 100.00 
Balance, net profit 1, 000. 00 
5, 300. 00 
Fruit Profit and Loss $300. 00 
Commission 5, 000. 00 
5, 300. 00 
Balance 1, 000. 00 
