3. O To be able to learn how to prepare an income statement BJE C T IV E

4. MONEY What is an Income statement

5. A statement that shows the financial results of the business for the accounting period

6. FINANCIAL RESULTS EARNED PROFIT ?

7. FINANCIAL RESULTS INCURRED LOSS?

8. WHO NEEDS IT? WHY DO YOU NEED IT? Stakeholders To make a decision

9. PARTS TITLE SALES COST OF SALES GROSS PROFIT OTHER INCOME OPERATING EXPENSES PROFIT / LOSS

11. PARTS TITLE SALES COST OF SALES GROSS PROFIT OTHER INCOME OPERATING EXPENSES PROFIT / LOSS TRADING ACCOUNT TRADING ACCOUNT

12. TRADING buy sell $ 50.00 $ 400.00 Gross profit $ 350.00

13. PROFORMA

14. TITLE Trading Account

15. Exercise no. 1 Required: Prepare the trading account of Judy for the year ended 31 December 2012. Required: Prepare the trading account of Judy for the year ended 31 December 2012.

16. Judy owns a retail store. The following information was provided for the year ended 31 December 2012: Sales200,000 Cost of Sales150,000 Exercise no. 1

17. Judy Trading Account For the year ended 31 December 2012 Judy Sales $ 200,000 Trading account for the year ended 31 December 2012

18. Judy owns a retail store. The following information was provided for the year ended 31 December 2012: Sales200,000 Cost of Sales150,000 Exercise no. 1 ך

19. Judy Trading Account For the year ended 31 December 2012 Judy Sales Less: Cost of sales $ 200,000 150,000 Trading account for the year ended 31 December 2012

20. Judy owns a retail store. The following information was provided for the year ended 31 December 2012: Sales200,000 Cost of Sales150,000 Exercise no. 1 ך ך

21. Judy Trading Account For the year ended 31 December 2012 Judy Sales Less: Cost of sales Gross Profit $ 200,000 150,000 50,000 Trading account for the year ended 31 December 2012

22. Exercise no. 2 Jed owns a buy and sell store. The following information was provided for the year ended 31 May 2012: Sales300,000 Cost of Sales250,000 Required: Prepare the trading account of Jed for the year ended 31 May 2012.

23. Jed Trading Account For the year ended 31 May 2012 Sales Less: Cost of sales Gross Profit $ 300,000 250,000 50,000 Exercise no. 2

24. What is Net sales? Sales after deducting sales returns or returns inwards

25. Proforma:

26. Sam owns a retail store. The following information was provided for the year ended 31 March 2012: Sales200,000 Sales Returns 20,000 Cost of Sales120,000 Required: Prepare the trading account of Sam for the year ended 31 March 2012 Exercise no. 3

27. Sam Trading Account for the year ended 31 March 2012 Sales Less: sales returns Net Sales $ 200,000 20,000 180,000 Exercise no. 3 Less: Cost of sales120,000 Gross profit60,000

28. Sam owns a retail store. The following information was provided for the year ended 31 March 2012: Sales200,000 Sales Returns 20,000 Cost of Sales120,000 Required: Prepare the trading account of Sam for the year ended 31 March 2012 Exercise no. 3 ך ך ך

29. Hannah owns an online shop. The following information was provided for the year ended 31 January 2012: Sales4,000,700 Sales Returns (returns inwards) 231,000 Cost of Sales1,230,500 Required: Prepare the trading account of Hannah for the year ended 31 January 2012 Exercise no. 4

30. Hannah Trading Account for the year ended 31 January 2012 Sales Less: sales returns Net Sales $ 4,000,700 231,000 3,769,700 Exercise no. 4 Less: Cost of sales1,230,500 Gross profit2,539,200

31. Quick answer + - - 2,539,200

32. What is COST OF SALES? + + -

33. 2 Columns

34. Exercise no. 5 Jess owns an online shop. The following information was provided for the year ended 31 January 2011: Sales4,000,700 Sales Returns (returns inwards)231,000 Inventory, opening350,000 Purchases1,250,000 Inventory, closing125,000 Required: Prepare the trading account of Jess for the year ended 31 January 2011

35. Jess Trading Account for the year ended 31 January 2011 Sales Less: sales returns Net Sales $ 4,000,700 Exercise no. 5 Less: Cost of sales Inventory opening Add: Purchases Less: Inventory closing Gross Profit

36. Exercise no. 5 Jess owns an online shop. The following information was provided for the year ended 31 January 2011: Sales4,000,700 Sales Returns (returns inwards)231,000 Inventory, opening350,000 Purchases1,250,000 Inventory, closing125,000 Required: Prepare the trading account of Jess for the year ended 31 January 2011 ך

37. Jess Trading Account for the year ended 31 January 2011 Sales Less: sales returns Net Sales $ 4,000,700 231,000 3,769,700 Exercise no. 5 Less: Cost of sales Inventory opening$ 350,000 Add: Purchases Less: Inventory closing Gross Profit

38. Exercise no. 5 Jess owns an online shop. The following information was provided for the year ended 31 January 2011: Sales4,000,700 Sales Returns (returns inwards)231,000 Inventory, opening350,000 Purchases1,250,000 Inventory, closing125,000 Required: Prepare the trading account of Jess for the year ended 31 January 2011 ך ך ך

39. Jess Trading Account for the year ended 31 January 2011 Sales Less: sales returns Net Sales $ 4,000,700 231,000 3,769,700 Exercise no. 5 Less: Cost of sales Inventory opening$ 350,000 Add: Purchases1,250,000 1,600,000 Less: Inventory closing125,000 Gross Profit

40. Exercise no. 5 Jess owns an online shop. The following information was provided for the year ended 31 January 2011: Sales4,000,700 Sales Returns (returns inwards)231,000 Inventory, opening350,000 Purchases1,250,000 Inventory, closing125,000 Required: Prepare the trading account of Jess for the year ended 31 January 2011 ך ך ך ך ך

41. Jess Trading Account for the year ended 31 January 2011 Sales Less: sales returns Net Sales $ 4,000,700 231,000 3,769,700 Exercise no. 5 Less: Cost of sales Inventory opening$ 350,000 Add: Purchases1,250,000 1,600,000 Less: Inventory closing1,475,000125,000 Gross Profit2,294,700

42. Quick answer - 2,294,700 + +

43. Dane Trading Account for the year ended 31 December 2011 Sales Less: sales returns Net Sales $ 5,120,700 571,050 4,549,650 Exercise no. 6 Less: Cost of sales Inventory opening$ 320,000 Add: Purchases2,253,000 2,573,000 Less: Inventory closing2,387,880185,120 Gross Profit2,161,770

44. Returned goods to the supplier v

45. Exercise no. 7 Laura owns a fashion clothing shop. The following information was provided for the year ended 31 January 2012 Sales8,120,700 Sales Returns451,050 Inventory, opening220,600 Purchases5,253,000 Purchases returns28,000 Inventory, closing295,120 Required: Prepare the trading account of Laura for the year ended 31 January 2012

46. Laura Trading Account for the year ended 31 December 2011 Sales Less: sales returns Net Sales $ Exercise no. 7 Less: Cost of sales Inventory opening$ Add: Purchases Less: Inventory closing Gross Profit Less: Purchases returns

47. Laura Trading Account for the year ended 31 December 2011 Sales Less: sales returns Net Sales $ 8,120,700 451,000 7,669,650 Exercise no. 7 Less: Cost of sales Inventory opening$ 220,600 Add: Purchases5,253,000 5,473,600 Less: Inventory closing5,150,480295,120 Gross Profit2,519,170 Less: Purchases returns28,000 5,445,600

48. Carol Trading Account for the year ended 31 January 2011 Sales Less: sales returns Net Sales $ 5,120,700 571,050 4,549,650 Exercise no. 8 (3-4 minutes) Less: Cost of sales Inventory at 1 Feb 2010$ 320,000 Add: Purchases2,253,000 2,573,000 Less: Inventory at 31 Jan 20112,374,880185,120 Gross Profit2,174,770 Less: Purchases returns13,000 2,560,000

49. Freight charges of the goods bought from suppliers CARRIAGE INWARDS  account used to record freight charges of the goods bought from suppliers  also called as “FREIGHT IN”  add to PURCHASES

51. Exercise no. 9 Brenda owns an antique shop. The following information was provided for the year ended 31 August 2011 Sales5,120,700 Sales Returns571,050 Inventory, 1 Sept 2010320,000 Purchases2,253,000 Purchases returns13,000 Carriage inwards28,000 Inventory, 31 Aug 2011185,120 Required: Prepare the trading account of Brenda for the year ended 31 August 2011

52. Brenda Trading Account for the year ended 31 August 2011 Sales Less: sales returns Net Sales $ 5,120,700 571,050 4,549,650 Exercise no. 9 Less: Cost of sales Inventory, 1 Sept. 2010$ 320,000 Add: Purchases2,253,000 2,573,000 Less: Inventory, 31 Aug 20112,402,880185,120 Gross Profit2,146,770 Less: Purchases returns13,000 2,588,000 Add: Carriage inwards28,000 2,601,000

53. Zoe Trading Account for the year ended 28 February 2012 Sales Less: sales returns Net Sales $ 5,120,700 571,050 4,549,650 Exercise no. 10 Less: Cost of sales Inventory at 1 Mar 2011$ 320,000 Add: Purchases2,253,000 2,573,000 Less: Inventory 28 Feb 20122,402,880185,120 Gross Profit2,146,770 Less: Purchases returns13,000 2,588,000 Add: Carriage inwards28,000 2,601,000

54. Quick answer - 2,146,770 + + + -

55. SUMMARY – trading account

56. PARTS TITLE SALES COST OF SALES GROSS PROFIT OTHER INCOME OPERATING EXPENSES PROFIT / LOSS PROFIT AND LOSS ACCOUNT PROFIT AND LOSS ACCOUNT

57. Profit and loss account Result: Net Profit (Profit for the Year) or Net Loss (Loss for the Year) Net Profit = If Total Income is more than total expenses Net Loss = If total income is less than the total expenses Title: “Use Profit and Loss account instead of Trading Account”

58. PROFORMA:

59. Exercise no. 11 Theresa owns a fashion magazine shop. The following information was provided for the year ended 31 January 2011 Gross Profit 20,000 Other Income10,000 Operating expenses5,000 Required: Prepare the profit and loss account of Theresa for the year ended 31 January 2011

60. Theresa Profit and Loss account For the year ended 31 January 2012 Gross profit Add: Other income $ 20,000 10,000 30,000 Exercise no. 11 Less: Operating expense Profit for the year 5,000 25,000

61. Exercise no. 11 Theresa owns a fashion magazine shop. The following information was provided for the year ended 31 January 2011 Gross Profit 20,000 Other Income10,000 Operating expenses5,000 Required: Prepare the profit and loss account of Theresa for the year ended 31 January 2011 ך ך ך

62. Exercise no. 12 Nicolai owns a sports shoe shop. The following information was provided for the year ended 31 January 2012 Gross Profit 80,000 Other Income20,000 Rent5,000 Heating and Lighting16,450 Wages27,000 Required: Prepare the profit and loss account of Nicolai for the year ended 31 January 2012

63. Nicolai Profit and Loss account for the year ended 31 January 2011 Gross profit Add: other income $ 80,000 20,000 100,000 Exercise no. 12 Less: operating expense Rent$ 5,000 Heating and lighting16,450 Wages48,45027,000 Profit for the year51,550

64. Exercise no. 13 Claire owns a pet shop. The following information was provided for the year ended 31 January 2011 Gross Profit 95,000 Other Income12,000 Rent5,000 Utilities expense16,000 Postage and Stationery2,500 Heating and Lighting16,450 Cleaning expense2,150 Wages and Salaries27,000 Sundry expenses-- Required: Prepare the profit and loss account of Claire for the year ended 31 January 2011

65. Claire Profit and Loss account for the year ended 31 January 2011 Gross profit Add: other income $ 95,000 12,000 107,000 Exercise no. 13 Less: operating expense Rent$ 5,000 Utilities expense16,000 Postage and stationery 69,100 2,500 Profit for the year37,900 Heating and lighting16,450 Cleaning expense2,150 Wages and salaries27,000 Sundry expense0

66. Claire Profit and Loss account for the year ended 31 January 2011 Gross profit Add: other income $ 95,000 12,000 107,000 Exercise no. 13 Less: operating expense Rent5,000 Utilities expense16,000 Postage and stationery 69,100 2,500 Profit for the year37,900 Heating and lighting16,450 Cleaning expense2,150 Wages and salaries $ 27,000 Sundry expense0

67. DISCOUNT RECEIVED  added to Gross Profit or Part of Other income DISCOUNT ALLOWED  added to Operating expenses CARRIAGE OUTWARDS  added to Operating expenses

68. Exercise no. 13 Pierre owns a pet shop. The following information was provided for the year ended 31 January 2012 Gross Profit 95,000 Rent5,000 Wages and Salaries27,000 Sundry expenses1,200 Discount Received 5,000 Discount Allowed12,000 Carriage outwards 2,600 Heating and Lighting1,800 Sundry Expenses2,900 Required: Prepare the profit and loss account of Pierre for the year ended 31 January 2012

69. Pierre Profit and Loss account for the year ended 31 January 2012 Gross profit Add: discount received $ 95,000 5,000 100,000 Exercise no. 13 (page 12) Less: operating expense Discount allowed12,000 Carriage outwards 52,500 2,600 Profit for the year47,500 Wages and salaries27,000 Heating and lighting1,800 Rent $ 5,000 Sundry expense4,100

71. Exercise no. 14 Sarah owns a jewelries and accessories shop whose financial year ends on 31 December. Her trial balance drawn up on 31 December 2013 included the following balances.

72. Additional Information: Stock 31 at December 2013 cost 3,000. Required: Prepare the income statement of Sarah for the year ended 31 December 2013

73. TA OE OI OE

74. Gross Profit$ 37,500 Net Profit$ 18,900

75. Exercise no. 15 James owns a hardware store whose financial year ends on 31 December. His trial balance drawn up on 31 December 2011 included the following balances

76. Additional Information: Stock at 31 December 2011 cost 4,000. Required: Prepare the income statement of James for the year ended 31 December 2011

77. OE TA OE TA OI

78. Gross Profit$ 85,500 Net Profit$ 66,000

79. Exercise no. 16 Joe owns a DVD store whose financial year ends on 31 August. His trial balance drawn up on 31 August 2012 included the following balances

80. Additional Information: Stock at 31August 2012 cost 4,000. Required: Prepare the income statement of Joe for the year ended 31 August 2012

81. TA OE OI OE

82. Gross Profit$ 325,440 Net Profit$ 254,350

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84. End