Double Entry System 3 DRCR

FINANCIAL STATEMENTS

An Overview… General Journal Special Journals Ledger Accounts Trial Balance Prepare Simple Financial Statements Adjustments

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 of goods sold + Gross Profit = Net Sales Cost price + Profit = Selling price

Trading Account for the year ended 31 Dec 2000 $$$$ Purchases Less: Returns Outwards Less: Closing Stock Costs of Gds Sold Gross Profit * XX (XX) XX (XX) XX Sales Less: Returns Inwards XX (XX) XX Opening Stock XX How does Trading a/c looks like?

Trading Account for the year ended 31 Dec 2000 $$$$ Purchases Less: Returns Outwards Less: Closing Stock Costs of Gds Sold Gross Profit * 12,000 (2,000) 11,000 (2,300) 8,700 12,900 Sales Less: Returns Inwards 23,000 (1,400) 21,600 Opening Stock 1,000 10,000 An Example

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 Net Profit ** Gross Profit * Revenues XX XX XX

Profit & Loss Account for the year ended 31 Dec 2000 $$ Rent Expense Insurance Expense Wages Depreciation Interest Expense Transport Expenses Net Profit ** Gross Profit * Commission Revenue Interest Revenue 12,900 7,500 1,000 21,400 1,000 3,400 7,000 3,000 1,200 2,580 3,220 An Example

Recall….Balance Sheet BALANCE SHEET AS AT 1 Jan 2000 BALANCE SHEET AS AT 1 Jan 2000 Owner’s Equity $ Capital Add: Profits Less: Drawings Long Term Liabilities Loan from bank Current Liabilities Creditors Other creditors Fixed Assets $ $ Fixed Assets $ $ Building Building Office Equipment Office Equipment Motor Vehicle Motor Vehicle Fixtures Fixtures Current Assets Current Assets Stock (*closing) Stock (*closing) Debtors Debtors Bank Bank Cash Cash Assets = Owner’s Equity + Liabilities Liabilities Same figure

BALANCE SHEET AS AT 1 Jan 2000 BALANCE SHEET AS AT 1 Jan 2000 Fixed Assets $ $ Fixed Assets $ $ Motor Vehicle Motor Vehicle Fixtures Fixtures Current Assets Current Assets Stock 4570 Stock 4570 Debtors 7400 Debtors 7400 Cash 630 Cash Example A = OE + L Owner’s Equity $ Capital Long Term Liabilities Loan from bank 3000 Current Liabilities Creditors 6650

IN CLOSING…