Financial Statement- Without adjustment

Financial Statement- refers to such statement which report the profitability and the financial position of the business at the
end of accounting period.

Profitability- Trading & Profit and Loss Account

Financial Position- Balance Sheet.

Calculation of Cost of Goods Sold=

 Opening Stock+ Purchases + Direct expenses- Closing Stock

OR

Sales- Gross Profit

 Adjusted Purchases= Net purchases + Opening Stock- Closing Stock

Examples:

1. calculate Gross Profit from the following information:

Closing Stock Rs 70,000, Wages Rs 40,000, Salary Rs 30,000, Sales Rs 6,88,000, Adjusted Purchases= Rs 5,50,000.

ANs: 5,50,000+ 40,000= Rs 5,90,000

2.Calcualte Cost of goods sold:

 Opening Stock Rs 40,000

 Net purchases Rs 50,000
  Net Sales Rs 1,90,000
 Wages & Salaries Rs 10,000
 Rent paid Rs 15,000
 Closing Stock Rs 15,000

Ans: COGS= Opening Stock + Purchases + Direct Expenses- Closing Stock

40,000+ 50,000+10,000- 15,000

Rs 85,000

3. Ascertain cost of goods sold and Gross Profit from the following:

 Opening Stock Rs 32,000

 Purchases Rs 2,80,000
 Direct expenses Rs 20,000
 Indirect expenses Rs 45,000
 Closing Stock Rs 50,000
 Sales Rs 4,00,000
 Sales return Rs 8000.

Ans: COGS= 2,82,000

GP= Sales- COGS

4,00,000-8000-2,82,000

Rs 1,10,000

4. calculate Gross Profit:

 Purchases Rs 6,80,000
  Return outward Rs 30,000
 Carriage inward Rs 20,000
 Carriage outward Rs 15,000
 Wages Rs 50,000
 3/4th of the goods sold for Rs 6,00,000.

ANs: COGS= Opening Stock + Purchases+ Direct expenses- Closing Stock

6,50,000+ 20,000+50,000

Rs 7,20,000 x3/4= 5,40,000

GP= 6,00,000-5,40,000

Rs 60,000

5. Calculate Closing Stock and Cost of goods sold:

Opening Stock Rs 5000, Sales Rs 16,000, Carriage inward Rs 1000, Sales return Rs 1000, Gross Profit Rs 6000, Purchases Rs
10,000, Purchase return Rs 900.

Ans: COGS= 9000( 16,000-1,000-6,000)

COGS= Opening Stock + purchases + Direct Expenses – Closing Stock

9000= 5000+ 10,000-900+ 1000- CS

Closing Stock Rs 6100

6. Calculate gross profit and cost of goods sold:

 Net Sales Rs 8,00,000

 Gross profit is 40% on Sales.

ANs: GP= 8,00,000 x 40/100

Rs 3,20,000

COGS= 8,00,000-3,20,000

Rs 4,80,000

7. Calculate gross profit and cost of goods sold:

 Net Sales Rs 12,00,000

 Gross profit is 33 1/3 % on Sales.

Ans: GP= 4,00,000 ( 12,00,000 x 1/3)

COGS= 12,00,000-4,00,000

Rs 8,00,000

8. Calculate gross profit and cost of goods sold:

 Net Sales Rs 9,00,000

 Gross profit is 20% on Cost.

Ans: COGS= Net Sales – GP

X= 9,00,000- 20/100 x
X+ 1/5 x= 9,00,000

6x/5= 9,00,000

X= 9,00,000x5/6

Rs 7,50,000

9. Calculate Closing Stock.

 Opening Stock Rs 1,20,000

 Purchases during the year Rs 9,30,000
 Sales during the year Rs 15,60,000
 Rate of gross profit 40% on sales.

10. Calculate Closing Stock.

 Opening Stock Rs 4,80,000

 Purchases during the year Rs 13,60,000
 Sales during the year Rs 19,50,000
 Rate of gross profit 30% on cost.

11. Calculate Net Sales and Gross Profit from the following:

 Cost of goods sold Rs 4,50,000

 Gross Profit 25% on Sales.

Profit and Loss Account- helps in the calculation of Net profit or Net loss of the firm for a financial year.

P&L Account represent all the indirect expenses and indirect income of the firm.
After getting Gross Profit from the business. Profit may be divided into two parts:

1 Operating Profit, 2 Net Profits

Operating Profit: Operating profit is that profit which is earned through the normal activities of the business. It can be
ascertained by deducting all operating expenses from the gross profit.
Operating profit is also called EBIT( Earnings before interest and tax).

Operating Profit= Net profit- Non operating income + Non operating expenses.

Operating Expenses= Office and administrative expenses, Selling and distribution expenses, discount, bad debt etc.

Non operating expenses= Interest on loan, Loss by fire, Loss by theft, charities & donations, Loss on sale of fixed assets
etc.

Non operating incomes: Commission, Interest, rent and dividend received, Gain on sale of assets etc.

2. Net Profit: Net profit is that profit which is earned after deducting all operating as well as non operating expenses from
the Gross Profit.

Format of P&L Account

Examples:

1.Prepare Profit and Loss Account for the year ended 31st March, 2010 from the following particulars:
Rs. Rs.

Gross profit 90,500 Discount allowed 600

Trade expenses 2,400 Lighting 4,100
Rates and taxes 1,200 Interest on investment 500
Carriage outwards 7,500 Commission received 600
Salaries 13,600 Bad debts 1,000
Postage and telegram 2,400 Discount (Cr.) 600
Rent 9,000 Interest on loan 1,800
Legal charges 2,000 Stable expenses 1,600

Ans: Profit & Loss Account

For the year ended 31 st March 2010
Particulars Rs Particulars Rs
To trade expenses 2400 By Gross Profit 90,500
To rates and taxes 1200 By interest on investment 500
To carriage outward 7500 Commission received 600
Salaries 13,600 Discount (Cr) 600
Postage and telegram 2400
Rent 9000
Legal expenses 2000
Discount allowed 600
Lighting 4100
Bad debt 1000
Interest on loan 1800
Stable expenses 1600
Net profit 45,000
92,200 92,200

2.From the following trial balance of Raj & Co. prepare trading and profit and loss A/c for the year ending 31 st March 2011.
Debit Balance Amount Credit Balance Amount

Stock 16,000 Sundry Creditors 20,000

Purchases 55,000 Purchases returns 1,000
Sales Returns 2,000 Sales 1,03,000
Carriage 3,500 Commission 4,500
Wages 12,500 Capital 56,000
Salaries 10,000 Bills Payable 8,500
Printing and stationery 3,400 Bank Loan 20,000
Trade expenses 2,000
Cash in hand 3,500
Bills receivables 8,000
Sundry Debtors 22,000
Land and buildings 30,000
Plant and machinery 20,000
 Drawings 8,000
Furniture and fixtures 10,600
Rent and taxes 6,500

Trading Account

For the year ended 31st March 2011

Particulars Rs Particulars Rs
To Opening Stock 16,000 By Sales 1,03,000 1,01,000
Purchases 55,000 54000 -SR 2000
-return 1000
Carriage 3500
Wages 12,500
Gross Profit 15,000
1,01,000 1,01,000

Profit & Loss Account

For the year ended 31st March 2011

Particulars Rs Particulars Rs
Salaries 10,000 Commission 4500
Printing and stationery 3400 Gross Profit 15,000
Trade expenses 2000 By net Loss 2400
Rent and taxes 6500
 21,900 21,900

3.From the following trial balance, Prepare trading and P&L Account:

Heads of Accounts LF Dr. Cr.

Capital A/c 1,00,000
Stock(1.4.19) 20,000
Cash at Bank 10,000
Cash in Hand 4400
Machinery A/c 60,000
Furniture & Fixtures 13,600
Purchases A/c 1,50,000
Wages A/c 1,00,000
Power & Fuel 30,000
Factory lighting 2000
Salaries 70,000
Discount allowed 5000
Discount received 3000
Advertising 50,000
Sundry office expenses 40,000
Sales 5,00,000
Debtors 85,000
Creditors 37,000
Value of closing stock on 31st March 2020 was Rs 27,000

Trading Account
 For the year ended ……………

Particulars Rs Particulars Rs
Opening Stock 20,000 Sales 5,00,000
Purchases A/c 1,50,000 By closing stock 27,000
Wages A/c 1,00,000
Power & Fuel 30,000
Factory lighting 2000
Gross Profit 2,25,000
5,27,000 5,27,000

Profit & Loss Account

For the year ended ………………….

Particulars Rs Particulars Rs
Salaries 70,000 By Discount received 3000
Discount allowed 5000 By Gross Profit 2,25,000
Advertising 50,000
Sundry office expenses 40,000
Net Profit 63,000
2,28,00 2,28,000
4. From the following information prepare Profit & Loss Account for the year ended 31 st March 2020.

Particulars Rs Particulars Rs
Gross Profit 2,65,500 Salaries and wages 20,800
Discount received 17,000 Discount allowed 3000
Commission received 7000 Interest received 2000
Fire insurance paid 6000 Commission paid on shares 14,000
Interest paid 5000 Freight outward 15,000
Rent paid 14,000 Rent received 12,500
Printing and Stationery 7500 Entertainment expenses 8000
Postage and courier 5500 Sales promotion expenses 7250
Bad debts 3250 Mis income 12,900
Depreciation 5000 Repair 3400
Carriage outward 4100 Telephone expenses 6000
Travelling expenses 6500 Gain on sale of machine 600
Bank charges 1900 Income from investment 11,500
Loss by fire 3500
Loss on sale of Furniture 4000
Dividend received on shares 6250
5. Calculate the amount of Gross Profit, Operating profit and Net profit on the basis of the following balances extracted
from the books of M/S Rajiv and Sons for the year ended March 31, 2017:

 Opening Stock Rs 50,000

 Net Sales Rs 11,00,000
 Net purchases Rs 6,00,000
 Direct Expenses Rs 60,000
 Administrative expenses Rs 45,000
 Selling and Distribution expenses Rs 65,000
 Loss due to Fire Rs 20,000
 Closing Stock Rs 70,000

Gross Profit= Net Sales- CoGS

COGS= 50,000 + 6,00,000+60,000-70,000= Rs 6,40,000

11,00,000-6,40,000= Rs 4,60,000( GP)

Operating Profit= Net Profit+ Non operating expenses-Non Operating income

3,30,000+20,000= 3,50,000

Net Profit= 4,60,000-45,000-65,000-20,000= Rs 3,30,000(NP)

6.Calculate operating profit from the following:

 Net profit Rs 5,00,000

 Dividend received 6000(NI)
 Loss on sale of furniture Rs 12,000(NE)
 Loss by fire Rs 50,000(NE)
 Salaries Rs 1,20,000
 Interest on loan from Bank Rs 10,000(NE)
 Rent received Rs 24,000(NI)
 Donation Rs 5100.(NI)

Operating Profit= Net Profit+ Non operating expenses-Non Operating income

7. Prepare Profit & Loss Account for the year ending 31st March 2019.

Particulars Rs Particulars Rs
Gross Profit 10,52,500 Discount allowed 15,000
Trade expenses 10,000 Lighting 3900
Carriage on sales 50,000 Commission received 4200
Office salaries 79,000 Bad debts 6000
Postage 3600 Discount Cr. 3000
Office rent 37,500 Interest on loan 11,000
Legal charges 2000 Stable expenses 7000
Audit fees 8000 Export duty 11,500
Donation 5500 Miscellaneous Income 2500
Sundry expenses 1800 Unproductive expenses 20,500
Selling expenses 26,600 Travelling expenses 12,500
Balance Sheet

“The balance sheet is a statement at a particular date showing on one side the trader’s property and possessions and on
the other hand the liabilities.”

 The main purpose of Balance sheet is to show the financial position of the Business at a particular point of time.
 It gives the information about the exact amount of capital at the end of the year and the addition or deduction made
into it in the current year.
 It helps in finding out whether the firm is solvent or not. The firm is solvent if the assets exceed external liabilities.
 It helps in preparing opening entries at the beginning of the next year.

Grouping and Marshalling of Assets and Liabilities in Balance Sheet:

Marshalling is the arrangement of various assets and liabilities in a proper order. It can be done in any of the following two
ways:

I) In the order of liquidity: According to this method, an asset which is most easily converted into cash such as cash
in hand written first and then will follow those assets which are comparatively less easily convertible, so that the
least liquid asset such as Goodwill will be shown at last.

In the same way , those liabilities which are to be paid at the earliest will be written first. In other words, Current Liabilities
are written first of all, then Non -current liabilities and lastly, the proprietors’ capital.

II) In the order of Permanence: This method is exactly the reverse of first method which was discussed above. Assets
which are most difficult to be converted into cash such as Goodwill will be written first and the assets which are
most liquid such as cash in hand will be written at the last.
In the same way Proprietor’s capital will be written at the first followed by Long term liabilities and at the end Current
liabilities will be shown.

Classification of Assets:

 Non Current Assets: Land & Building, machinery, Motor Vehicle etc.
 Current Assets: Cash, Bank, B/R, Debtors etc.
 Liquid Assets: Cash, bank etc.
 Fictitious assets or Nominal Assets: Debit Balance of P&L Account, Writing off advertisement expenses etc.
 Wasting Assets: Which are exhausted or consumed over a period of time such as Mines, Oil wells etc
 Tangible and Intangible assets: Furniture, Goodwill etc

Classification of Liabilities:

 Non Current Liabilities/Long term Liabilities: Public Deposits, Long term Loans, Debentures etc.
 Current/Short Term Liabilities: Bank overdraft, Creditors, Outstanding expenses etc.
 Contingent Liabilities: These liabilities which will become payable only on the happening of certain events such as:

a) Liabilities for Bill discounted

b) Liabilities in respect of a suit pending in court of law.

c) Liabilities in respect of a guarantee given for another person.

Contingent Liabilities are not shown in Balance sheet, they will be shown as footnote.

Balance Sheet

As at……………………………………..

Liabilities Rs Assets Rs
Current Liabilities Current Assets
Bank Overdraft Cash in hand
B/P Cash at Bank
Creditors B/R
O/S expenses Short term investment
Unearned income Sundry Debtors
Non Current Liabilities Closing Stock
Long term Loan Prepaid expenses
Reserves Accrued income
Capital Long term investment
+Net Profit Non Current Assets
-Drawing Furniture
-Income Tax Loose Tools
-LIC Motor Vehicle
Plant & Machinery
Land & Building
Patents & Trademarks
Goodwill
8. From the following prepare Trading , Profit & Loss Account and Balance sheet as at 31 st March 2020. Closing stock 22,000

Dr. balance Rs Cr. balance Rs

Stock on 1.4.19 10,000 Discount received 750
Purchases 58,000 Return outwards 2600
Wages 4700 Sales 98,650
Return inward 3520 B/P 3000
Carriage on purchases 2360 Sundry Creditors 5600
Carriage on sales 710 Creditors for Rent 500
Office salaries 4800 Capital 40,000
Rent and taxes 2400 Loans from X 10,000
Cash 1100 Commission 1200
Bank Balance 7820
Bad debts 600
Discount allowed 640
Land & Building 20,000
Scooter 6600
Scooter repairs 850
B/R 3500
Commission 1800
Sundry Debtors 25,400
Interest on X’s Loan 1500
Drawings 6000

Trading Account

For the year ended 31st March 2020

Particulars Rs Particulars Rs
Opening Stock 10,000 Sales 98,650 95,130
 -return 3520
Purchases 58,000 55,400 Closing Stock 22,000
-return 2600
Wages 4700
Carriage on purchases 2360
Gross Profit 44,670
1,17,130 1,17,130
Profit & Loss Account

For the year ended 31st March 2020

Particulars Rs Particulars Rs
Carriage on sales 710 Discount received 750
Salaries 4800 Commission 1200
Rent and taxes 2400 Gross profit 44,670
Bad debts 600
Discount allowed 640
Scooter repairs 850
Commission 1800
Interest on X’s Loan 1500
Net Profit 33,320
46,620 46,620

Balance sheet

As at 31st March 2020

Liabilities Rs Assets Rs
Capital 40,000 Cash 1100
-Drawing 6000 Bank Balance 7820
+ Net profit33,320 67,320 Land & Building 20,000
B/P 3000 Scooter 6600
Sundry Creditors 5600 B/R 3500
Creditors for Rent 500 Sundry Debtors 25,400
Loans from X 10,000 Closing Stock 22,000
86,420 86,420

9.From the following prepare Trading , Profit & Loss Account and Balance sheet as at 31 st March 2017.

Particulars Dr. Cr.

Opening Stock 30,000
Closing Stock 46,200
Purchases and Sales 2,30,000 3,45,800
Returns 12,500 15,200
Commission on 1200
Purchases
Freight and carriage 26,000
Wages & Salary 10,800
Fire insurance premium 820
Business Premises 40,000
Sundry Debtors 26,100
Sundry Creditors 26,700
Goodwill 8000
Patent 8400
Coal, gas and water 12,100
Printing & Stationery 2100
Postage 710
Travelling expenses 4250
Drawings 7200
Depreciation 1000
General expenses 8350
Capital 89,760
Investment 8000
Interest on investment 800
Cash in hand 2570
Bank Account 5200
Commission 4600 4400
Loan on Mortgage 30,000
Interest on loan 3000
B/P 2280
B/R 4540
Income tax 3000
Horses and carts 20,300
Discount on purchases 1600

Trading Account

For the year ended 31st March 2017

Particulars Rs Particulars Rs
 Profit & Loss Account

For the year ended 31st March 2017

Particulars Rs Particulars Rs

Balance sheet

As at 31st March 2017

Liabilities Rs Assets Rs
10. Prepare Trading, Profit & Loss Account and Balance sheet as at 31 st March 2020

Particulars Rs Particulars Rs
Debit balances Rent 8000
Debtors 15,000 Salaries 20,000
Opening Stock 50,000 Drawings 20,000
Land & Building 1,00,000 Purchases 1,00,000
Cash in hand 16,000 Office expenses 25,000
Cash at Bank 40,000 Plant & machinery 57,000
Wages 30,000 Credit Balances:
B/R 20,000 Capital 2,50,000
Interest 2000 Interest 6,000
Bad debts 5000 Sundry creditors 70,000
Repairs 3000 Sales 1,70,000
Furniture and fixtures 15,000 B/P 40,000
Depreciation 10,000
st
On 31 March 2020 the stock was valued at Rs 1,00,000.

Trading Account

For the year ended 31st March 2020

Particulars Rs Particulars Rs
Opening Stock 50,000 Sales 1,70,000
Purchases 1,00,000 Closing Stock 1,00,000
Wages 30,000
Gross Profit 90,000
2,70,000 2,70,000
Profit & Loss Account

For the year ended 31st March 2020

Particulars Rs Particulars Rs
Interest 2000 By Gross profit 90,000
Bad debts 5000 Interest 6,000
Repairs 3000
Depreciation 10,000
Rent 8000
Salaries 20,000
Office expenses 25,000
Net profit 23,000
96,000 96,000

Balance sheet

As at 31st March 2020

Liabilities Rs Assets Rs
Capital 2,50,000 2,53,000 Debtors 15,000
-Drawing 20,000 Land & Building 1,00,000
+Net profit 23,000
Sundry creditors 70,000 Cash in hand 16,000
B/P 40,000 Cash at Bank 40,000
B/R 20,000
Furniture and 15,000
fixtures
Plant & machinery 57,000
 Closing Stock 1,00,000
3,63,000 3,63,000

11. From the following prepare Trading , Profit & Loss Account and Balance sheet as at 31 st March 2020.

Particulars Dr. Cr.

Capital 1,50,000
Opening Stock 30,000
Cash at Bank 10,000
Cash in hand 5000
Machinery 1,00,000
Furniture 13,000
Purchases 2,00,000
Wages 50,000
Carriage inwards 33,000
Salaries 70,000
Discount allowed 4000
Discount received 5000
Advertising 50,000
Office expenses 40,000
Sales 5,00,000
Debtors 90,000
Creditors 40,000
st
On 31 March 2020 the stock was valued at Rs 50,000. Its net realizable is Rs 51,500.

Trading Account

For the year ended 31st March 2020

Particulars Rs Particulars Rs
 Profit & Loss Account

For the year ended 31st March 2020

Particulars Rs Particulars Rs

Balance sheet

As at 31st March 2020

Liabilities Rs Assets Rs

12. From the following prepare Trading , Profit & Loss Account and Balance sheet as at 31 st March 2020.

Particulars Rs Particulars Rs
Capital(Cr.) 3,60,000 Salaries 60,000
Machinery 70,000 General expenses 20,000
Sales 8,20,000 Rent 50,000
Purchases 4,00,000 Purchase return 5000
Sales return 10,000 Debtors 3,00,000
Opening Stock 1,00,000 Cash 40,000
Drawings 40,000 Carriage outwards 20,000
Wages 1,00,000 Advertising 20,000
Carriage inwards 5000 Creditors 50,000

On 31st March 2020 the stock was valued at Rs 2,00,000.

ANs: GP 4,10,000, NP=Rs 2,40,000 and Balance sheet Rs 6,10,000

Trading Account

For the year ended 31st March 2020

Particulars Rs Particulars Rs

Profit & Loss Account

For the year ended 31st March 2020

Particulars Rs Particulars Rs
 Balance sheet

As at 31st March 2020

Liabilities Rs Assets Rs