E5-E6 CIVIL

Understanding Financial Statement –

Balance Sheet and Profit and Loss Account
 WELCOME

• This is a presentation for the E5-E6 Civil Module.

• Topic: Understanding Financial Statement – Balance sheet

and Profit and Loss Account.

• Eligibility: Those who have are eligible for up-gradation

from E5 to E6.

• This presentation is last updated on 15-04-2011.

• You can also visit the Digital library of BSNL to see this
topic.

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 AGENDA

Accounting Mechanism.
Accounting Principles.
Balance Sheet.
Profit and Loss Account.

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 Accounting Mechanism
 Transaction.
 Business Transaction.
 Voucher.

 Recording.
 Books of Account.
 Purchase Book, Sales Book, Cash Book, Journal.
 Classification
 Heads- Salaries, Rent, Raw Material.
 Ledger Account – transactions of similar nature
 Ledger.
 Accounting Mechanism
 Summarization.
 Periodic presentation of classified data – Ledger Account
Balances- in a statement form.
 Trial Balance.

 Financial Statements
 Auditing.
 Accounting Principles

 Money Measurement Concept.

 Business Entity Concept.
 Going Concern Concept.
 Cost Concept.
 Dual Aspect – Double Entry System.
 Accounting Equation.
 Conservative Concept.
 Accrual Concept.
 Materiality.
 Balance Sheet
 A snap-shot picture of an organization, usually on 31st
March of an Year.

 A Statement of Liabilities (Sources of Funds) &

Assets (Application of Funds) on that date.

 A cumulative record – Reflects Result of all recorded

accounting transactions since enterprise was formed.

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 Balance Sheet
Sources of Funds (Liabilities)

Shareholders' Funds
- Share Capital
- Reserves and Surplus

Loans
- Secured
- Unsecured

Deferred Tax Liability

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Total Liabilities:
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 Balance Sheet
Application of Funds (Assets)
Fixed Assets
Investments
Current Assets, Loans and Advances
Inventories
Work In Progress
Sundry Debtors
Cash and Bank Balances
Other Current Assets

Less Current Liabilities and Provisions

Net Current Assets

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Total Assets:
-----------------------------------

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Sample Trial Balance Sheet
Trial Balance
Cash 10000
Accounts
28000
Receivable
Inventory 55000
Prepaid Expenses 2000
Equipment 25000
Computers 15000
Accum. Depr Equip 8000
Accum. Depr
6000
Computers
Goodwill 10000
Accounts Payable 25000
Expenses Payable 5000
Payroll Taxes
2500
Withheld
Loans Payable -
10000
Short Term
Loans Payable -
30000
Long Term
Capital Stock 10000
Paid In Capital 5000
Retained Earnings 22000
145000 123500
Net Profit 21500
145000 145000

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 Balance Sheet
Balance Sheet
Assets
Current Assets:
Cash
Accounts Receivable
Inventory
Prepaid Expenses
Fixed Assets:
Equipment
Equipment Depreciation
Computers
Computer Depreciation
Other Assets:
Goodwill
Liabilities
Current Liabilities:
Accounts Payable
Expenses Payable
Payroll Taxes Withheld
Loans Payable (short term)
Long-term Liabilities:
Loans Payable (long term)
Shareholders' Equity
Beginning Retained Earnings
Net Income
Capital Stock
Paid in Capital
Current Assets
Accumulated Depreciation
Net Fixed Assets
Other Assets
Total Assets
Total Current Liabilities
Total Long Term Liabilities
Total Liabilities
Ending Retained Earnings
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

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 Profit and Loss Account
 Also known as Income Statement.

 A Statement for a period of time, usually a Financial Year

– 1st April of previous year to 31st March of current Year.

 It is a statement of Revenue and Expenses.

 Gross Revenue (Turnover or Sales) is the first figure and

Profit After Tax(PAT) the last figure.

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Profit and Loss Account – An Example
Year N Year N-1
Rs '000 Rs '000
Revenue 12,500 10,000
Cost of Sales 7,500 6,000
Gross Profit 5,000 4,000
Gross profit margin (gross 40% 40%
profit / revenue)
Operating Costs
Sales and distribution 1,260 1,010
Finance and administration 570 555
Other overheads 970 895
Depreciation 235 210
Total Operating Costs 3,035 2,670
Operating Profit (gross 1,965 1,330
profit less operating costs)
Operating profit margin 15.7% 13.3%
(operating profit / revenue)
Interest (450) (475)
Profit before Tax 1,515 855
Taxation (455) (255)
Profit after Tax 1,060 600
Dividends 650 400
Retained Profits 410 200

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