Double Entry System 3

DR

CR

FINANCIAL STATEMENTS

An Overview
General Journal Special Journals

Ledger Accounts

Trial Balance Adjustments

Prepare Simple Financial Statements

Objectives
At the end of the lesson, students should be able to : know the purpose of preparing Final Accounts. know what is a Trading Profit & Loss Statement. know how to draw up a Trading P & L statement and a Balance Sheet on the last day of the accounting period.

Opening Stock + Net Purchases Closing Stock = Cost of goods sold

Cost price + Profit = Selling price

Cost of goods sold + Gross Profit = Net Sales

How does Trading a/c looks like?

Trading Account for the year ended 31 Dec 2000 $
Opening Stock Purchases Less: Returns Outwards Less: Closing Stock Costs of Gds Sold Gross Profit * XX XX XX XX XX (XX) XX XX (XX)

$
XX Sales Less: Returns Inwards

$
XX (XX)

$
XX

An Example Trading Account for the year ended 31 Dec 2000 $

Opening Stock Purchases Less: Returns Outwards Less: Closing Stock Costs of Gds Sold Gross Profit * 8,700 12,900 21,600 21,600 12,000 (2,000)

$
1,000 Sales Less: Returns Inwards 10,000 11,000 (2,300)

$
23,000

(1,400) 21,600

Net Profit = Gross Profit + Operating Revenues Operating Expenses

How does Profit & Loss a/c looks like?

Profit & Loss Account for the year ended 31 Dec 2000 $ Expenses XX Gross Profit * $ XX

Net Profit **

XX

Revenues

XX

XX

XX

An Example Profit & Loss Account for the year ended 31 Dec 2000 $
Rent Expense Insurance Expense Wages Depreciation Interest Expense Transport Expenses Net Profit ** 1,000 3,400 7,000 3,000 1,200 2,580 3,220 Gross Profit * Commission Revenue Interest Revenue

$
12,900 7,500 1,000

21,400

21,400

Recall.Balance Sheet
Assets = Owners Equity + Liabilities BALANCE SHEET AS AT 1 Jan 2000
Fixed Assets $ Building Office Equipment Motor Vehicle Fixtures Current Assets Stock (*closing) Debtors Bank Cash
$

Owners Equity Capital Add: Profits Less: Drawings Long Term Liabilities Loan from bank Current Liabilities Creditors Other creditors

Same figure

Example

OE + L

BALANCE SHEET AS AT 1 Jan 2000

Fixed Assets $ $ Motor Vehicle 25000 Fixtures 10050 35050 Current Assets Stock 4570 Debtors 7400 Cash 630 12600 47650 Owners Equity Capital
$

38000

Long Term Liabilities Loan from bank 3000 Current Liabilities Creditors 6650

47650

IN CLOSING