Accounting Course – Book 3
- 1 -
Exercise
Extract a trading and profit and loss account for the year ended 30
th
June2006 for F. Kidd. The trial balance as at 30
th
June 2006 after his first year oftrading was as follows:
Trial Balance as at
Account Name Debit Credit
Rent 1560Insurance 305Lighting and heatingexpenses 516Motor expenses 1960Salaries and wages 4850Sales 35600Purchases 30970Sundry expenses 806Vans 3500Creditors 3250Debtors 6810Fixtures 3960Buildings 28000Cash at bank 1134Drawings 6278Capital 5179990649 90649
Stock at 30
th
June 2006 was £9960
F. Kidd
Trading and Profit and Loss Account for year ended 30
th
June 2006
£ £Sales 35600Purchases 30970Less Closing Stock (9960)
Cost of goods sold (
21010)
Gross Profit 14590Less ExpensesRent 1560Insurance 305Lighting & Heating 516Motor Expenses 1960Salaries & Wages 4850Sundry 806
Total expenses
9997
Net Profit 4593
Accounting Course – Book 3
- 2 -
We are now going to learn the following:
1. Why balance sheets are not part of the double entry system2. Why it is important that account balances are shown under appropriateheadings in the balance sheet3. The meanings of the terms FIXED ASSET, CURRENT ASSET,CURRENT LIABILITY and LONG TERM LIABILITY4. How to describe the sequence in which each of the five maincategories of items appears in the balance sheet5. How to describe the sequence in which each fixed asset is entered inthe balance sheet6. How to How to describe the sequence in which each current asset isentered in the balance sheet7. How to draw up a balance sheet from information given in a trialbalanceEarly in the course we learnt that balance sheets contain details of assets,liabilities and capital. The amounts and items in the balance sheet are to befound in the accounting books and as shown at the end of Book 2 only thoseaccounts with balances,
NOT
included in the Trading and Profit and Lossaccount are included. All these accounts must be
ASSETS
,
LIABILITIES
and
CAPITAL
.From a previous exercise in Book 2 for B. Swift we must now allow foradjustments of the Capital, (after we have run the Trading and Profit and LossStatement), and then use this in the trial balance. The stock is an asset sothis also added into our calculations. We also remove the accounts that werein the Trading and Profit and Loss account, as follows:B SwiftTrial Balance as at 31
st
December 2005Dr CrSalesPurchasesRentLighting expensesGeneral expensesFixtures & fittingsDebtorsCreditorsBankCashDrawingsCapital£290024015060500680151020700£385091020006760 6760
Accounting Course – Book 3
- 3 -
This will become:
B SwiftTrial Balance as at 31
st
December 2005Dr CrFixtures & fittingsStockDebtorsCreditorsBankCashCapital£500300680151020£91021003010 3010
We can now create the Balance Sheet:
B. SwiftBalance Sheet as at 31/12/05Assets £Fixtures and Fittings 500Stock 300Debtors 680Bank 1510Cash 203010Less liabilitiesCreditors (910)Capital 2100
Capital amount hasnow been adjustedStock has been addedbecause it is an Asset
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Advantages of using a folio column: for Accounting Course Book 3
A book I created from my notes and exercises from my AS level 1 Class in Accounting - part of a series of 6.
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