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Preparation of Financial Statements

Year End Process


At the end of the year the income accounts and the expenditure accounts are balanced off and the balance are transferred to the Income statement. By balancing the Income Statement the profit or loss for the period is calculated which is transferred to the capital account.

Account
Profit Loss

Dr
Income Statement Capital Account

Cr
Capital Account Income Statement

The drawing account is balanced and transferred to the capital account. The remaining assets the liabilities accounts are balanced off and carried forward to the next accounting period. These will appear in the balance sheet prepared as at the last date of the accounting year.

Peter Ltd
Question
The following Trial Balance was extracted from Peter Ltd on 31st December 2004. $ Turnover Expenses Drawings MV Bank Payables Capital 470 100 20 240 110 30 140 470 $ 300

You are required to complete the4 following accounts are prepare the for the year ended 31.12.2004

Turnover
B/D 300 B/D

Expenses
100

Income statement
Exp Turnover

Income Statement
Turnover Expenses Profit

Drawing Account
B/D 20

Capital Account
B/D 140

Peter Ltd
Balance Sheet
Non Current Assets MV Current Assets Bank Capital & Liabilities Capital at Liabilities + Profit - Drawings Capital at End Current Liabilities Payables

Question
Youve been provided with the trial balance of J Sparks for the year ended 31 st of December 2009. Dr Description Sales Purchase Long Term Loan Land & Building Motor vehicles Carriage Inwards Carriage Outwards 300,000 100,000 4,000 6,000 100,00 50,000 ($) Cr ($) 500,000

Return Inwards Return outwards Electricity Rent & Rates Heating & Lighting Postage & Stationary Bad Debts Discounts Advertising Salesman Salary Wages Interest Expenses Commission Income Interest Income Debtors Creditors Bank balance Cash Balance Drawings Capital

10,000 15,000 2,000 3,000 6,000 1,000 4,000 5,000 8,000 6,000 8,000 9,000 13,00 15,000 50,000 20,000 200,000 75,000 10,000 287,000 907,000 907,000 7,000

You are required to


Prepare an Income statement for the year ended 31.12.2009 and a balance sheet as at that date.

I Ching

Question
From the following trial balance I Ching extracted after one years trading. Prepare an Income Statement for the year ended 31 December 2003. A Balance sheet is also required. Trial Balance as at 31 December 2003 DR ($) Sales Purchase Salaries Motor expenses Rent Insurance General expenses Premises Motor Vehicles Debtors Creditors Cash at bank Cash in hand Drawings Capital 35,424 11,654 40 895 5,424 35,424 14,629 2,150 520 670 111 105 1,500 1,200 1,950 1,538 CR ($) 28,462

You are required to


Prepare an Income Statement for the year ended 31.12.2003 and a balance sheet as at that date.

D Blacksmith Question
From the following trial of D Blacksmith after his first years trading. You are required to draw up an Income statement for the year ended 30 June 2008. A balance sheet is also required. Trail Balance as at 30 June 2008. DR ($) Sales Purchase Rent Lightening & heatining Expenses Salaries & Wages Insurance Building Fixtures Debtors Sundry Expenses Creditors Cash at bank Drawings Vans Capital 3,847 2,400 5,500 1,133 115,900 115,900 23,803 854 422 3,164 105 70,000 1,000 3,166 506 1,206 CR ($) 48,794

You are required to

Prepare an Income Statement for the year ended 30.06.20083 and a balance sheet as at that date.

Adjusting For Closing Stocks


Stocks held a company would be one of its current assets. When ever goods are purchased it is debited to the purchases account as an expense. The asset is not recognized at this point. At the end of a given year a company would normally possess a certain amount of stocks which could not be sold during that year. The purchases account would contain all purchases made during the year including the closing stock. It would be incorrect to match the sales revenues with total purchases in a situation like this. Such closing stock held by the company would amount to be one of the current assets as at the balance sheet date. The following adjustments are now needed to rectify the situation. (i) (ii) To recognize the asset of stock. To adjust cost sales, so that it would reflect the cost of the goods sold and not total purchases.

Account
Stock Account Cost of Sales

Dr ($)
XX

Cr ($)

XX

This stock is referred to as the closing stock as at the end of the year. As at beginning of the next year the same stock would be referred to as the opening stock. During the second year if these goods are sold the balance in the stock account would be charged to cost of sales as follows.

Account
Cost of Sales Stock Account

Dr ($)
XX

Cr ($)

XX

Question
From the following trial of F Chaplin draw up on conclusion of his first year in an Income statement for the year ended 31 December 2008. A balance sheet is also required.

Trail Balance as at 31 December 2008.


DR ($) General Expenses Rent Motor Expenses Salaries Insurance Purchases Sales Motor Vehicles Creditors Debtors Premises Cash at bank Cash in hand Capital Drawings 4,350 56,322 56,322 4,090 20,000 1,375 25 24,347 2,800 5,160 210 400 735 3,560 392 18,385 26,815 CR ($)

Stock at December 2008 was $ 4,960.

You are required to


Prepare an Income Statement for the year ended 31.12.2008 and a balance sheet as at that date.

F Kidd
Question
The Trial Balance of Kidd as at 30th June 2008 is as follows.
DR ($) Rent Insurance Lightning & heating expenses Motor expenses Salaries & Wages Sales Purchases Sundry expenses Vans Creditors Debtors Fixtures Buildings Cash at bank Drawings Capital 90,649 6,810 3,960 28,000 1,134 6,278 51,799 90,649 30,970 806 3,500 3,250 1,560 305 516 1,960 4,850 35,600 CR ($)

You are required to


Prepare an Income Statement for the year ended 30.06.2008 and a balance sheet as at that date.

Question
From the following trial of R Graham draw up an Income statement for the year ended 30 September 2009, and a balance sheet as at that date.

DR ($) Stock 1 October 2008 Carriage Outwards Carriage inwards Returns inwards Return outwards Purchase Sales Salaries & Wages Rent Insurance Motor expenses Office expenses Lighting and heating expenses General expenses Premises Motor Vehicles Fixtures and fitting Debtors Creditors 3,862 304 78 664 216 166 314 5,000 1,800 350 3,896 11,874 2,368 200 310 205

CR ($)

322

18,600

1,731

Cash at bank Drawings Capital

482 1,200 12,636 33,289 33,289

Stock at 30 September 2009 was $2,946.

You are required to


Prepare an Income Statement for the year ended 30.09.2009 and a balance sheet as at that date.

Question
The Following trial balance was extracted from the books of B Jackson on 30 April 2007. From it, and the note about stock, prepare his Income statement the year ended 30 April 2007 and a balance sheet as at that date.

DR ($) Sales Purchases Stock 1 May 2006 Carriage outwards Carriage Inwards Return Inwards Return outwards Salaries & Wages Motor expenses Rent Sundry expenses Motor Vehicle Fixtures and fittings 2,447 664 576 1,202 2,400 600 11,556 3,776 326 234 440

CR ($) 18,600

355

Debtors Creditors Cash at bank Cash in hand Drawings Capital

4,577 3,045 3,876 120 2,050 12,844 34,844 34,844

You are required to


Prepare an Income Statement for the year ended 30.04.2007 and a balance sheet as at that date.

Question
The Following is Trial Balance of J Smailes as at 31 March 2009. Draw up a set of financial statements for the year ended 31 March 2009.

DR ($) Stock 1 April 2008 Sales Purchases Carriage Inwards Carriage outwards Return outwards Wages & Salaries Rent & rates Communication expenses Commissions payable Insurance 10,240 3,015 624 216 405 69,185 420 1,570 18,160

CR ($)

92,340

640

Sundry Expenses Buildings Debtors Creditors Fixtures Cash at bank Cash in hand Drawings Capital

318 20,000 14,320 8,160 2,850 2,970 115 7,620 50,888 152,028 152,028

Stock at 31 March 2009 was $ 22,390.

You are required to


Prepare an Income Statement for the year ended 31.03.2009 and a balance sheet as at that date.