Prepared to know the profit/loss earned.  Consists of 

Manufacturing A/c  Trading and Profit/Loss A/c  Balance sheet 

Trading A/c  Trading A/c To know the trading results  To know how much ³Gross Profit´ has been earned.  All Direct Expenses included  .  Gross Profit ± difference between sales and cost of good sold.

Format of Trading A/c TRADING ACCOUNT for the year ended ___________ Particular Amount Particular Amount To Opening Stock By Sales less: Sales Return To Purchases less: Purchase return By Closing Stock To Direct Expenses By Gross Loss c/d To Carriage Inwards To Wages To Fuel & Power To Manufacturing Expenses To Coal. Water & Gas To Motive Power To Octroi To Import Duty To Custom Duty To Consumable Stores To Salary of Foreman/Works Manager To Royalty on Manu.Goods To Gross Profit c/d .

Profit/Loss A/c   To calculate ³Net Profit´. Indirect Expenses included     Selling and Distribution exp Management exp Financial exp Extraordinary losses/exp incurred to maintain the assets into working order   Prepared from Nominal a/c Balance transferred to capital a/c .

Expenses To Bad Debts To Godown Rent To Export Expenses To Carriage Outwards To Bank Charges To Agents Commission To Upkeep of Motor Lorries To Management Expenses To Rent. Rates & Taxes To Heating & Lighting To Office Salaries To Printing & Stationery To Postage & Telegrams To Telephone Charges To Legal Charges .Format of Profit/Loss A/c Particular PROFIT AND LOSS ACCOUNT for the year ended____________ Amount Particular By Gross Profit b/d By Interest Received By Discount By Commission By Rent from tenants By Income from Investments By Apprenticeship Premium By Interest on debentures By Income from other sources By Miscellaneous revenue By Net Loss Transferred to capital a/c Amount To Gross Loss b/d To Selling & Distribution Expenses To Travellers' Salaries.

By insurance) To Net Profit Transferred to capital a/c .Format of Profit/Loss A/c To Audit Fees To Insurance To General Exp To Depreciation & Maintainence To Depreciation To Repairs & Maintainence To Financial Expenses To Discount Allowed To Interest on Capital To Interest on Loans To Discount on Bills To Extraordinary Exp To Loss by fire (not cov.

Expenses to be excluded from P/L A/c Domestic and Household Exp  Income Tax  Life Insurance Premium  Income on private Investment  .

Are required to find out the cost of goods manufactured besides gross profit and net profit Objectives (to show)   Cost of finished good produced Items such as cost of material consumed.Manufacturing A/c    Concerns converting raw material into finished goods. productive wages. direct and indirect expenses .

MANUFACTURING. TRADING AND PROFIT/LOSS ACCOUNT for the year ended____________ Particular Amount Particular To Raw Material Consumed: xxx By Cost of goods manufacured transferred to (opening stock of raw material xxx trading A/c Add purchases during the year xxx Less Closing Stock of raw materials) xxx To Direct Wages xxx To Direct exp xxx Prime Cost To Factory Lighting xxx To Factory Rent xxx To Indirect Wages xxx To Depreciation on Plant & machinery (factory) xxx To supervisor's salary xxx To Stores consumed xxx xxx To Work-in-progress (opening balance xxx less closing stock of work-in-progress xxx xxx less sale of scrap xxx To Opening stock of Finished goods To Cost of goods manufacured transferred to trading A/c To Gross Profit c/d To Administration Exp To Selling Exp To Distribution Exp To Financial Exp To Maintainence Exp To Net Profit transferred to capital A/c xxx xxx xxx xxx xxx xxx xxx xxx xxx By Gross Profit b/d To All Items of income and gain By Sales By Closing Stock of Finished Goods Amount xxx xxx xxx xxx xxx .

Profit/Loss Appropriation A/c PROFIT AND LOSS APPROPRIATION A/C for the year ended____________ Particular Amount Particular Amount To Transfer to general reserve By Balance b/d To Transfer to sinking funds (balance of profit from previous year) To Interim Dividend By Net Profit To Proposed Dividends (for the current year) .

Balance sheet Tells about the financial standing of the firm  Two types of format  Horizontal or Account form  Vertical or Report form  . in hand. share.dividend and tax payable.govt.fixed deposits.profit/loss a/c (retained earnings) . spares and tools) .Vertical form BALANCE SHEET as on________________ Liabilities Assets Particular Amt Particular Share Capital . for contingencies .Discount on issue of shares and bonds Provisions . bank overdraft . unsecured bonds/debentures Current Liabilties . building.sundry creditors. . trade mark Amt Investments . patent.from Exp.inventories (RM.goodwill. WIP.taxation. bills receivable .. Deferred Exp.outstanding exp. dividends. sundry debtors Unsecured Loans .capital and general reserve . Debentures.equity/preference Fixed Assets . securities.prepaid exp. banks. accrude interest. bonds Current Assets . plant & machinery Reserves and surplus . bills payable . copyright. debentures Secured Loans ..share premium a/c . bonds. short term advances Loans and Advances Deferred Expenditure . furniture.FG. cash at bank.

Called ³preference share´ because:   At time of liquidation ± paid before equity shares but after secured loans Preference over dividend distribution also. .Liabilities    Share Capital ± money collected from the promoters of the business and from general public in the form of ³Share´. Preference Share Capital ± no voting right. Equity Share Capital ±have voting right but cannot demand dividend. fixed dividend paid (if Co.Balance Sheet Analysis . is in profit).

Liabilities  Reserves and Surplus Created by undistributed profit or retained earnings.Balance Sheet Analysis . reserve for redemption of bonds.  Includes  ‡ Share Premium ‡ Reserves (general reserve. reserve for contingencies ‡ Retained earnings (previous year profits) ‡ Surplus profit (current year) .

Balance Sheet Analysis .Liabilities  Secured Loans   Loans against security Classified ‡ Loans from financial institutions ‡ Secured debentures/bonds  Unsecured Loans   Loans and advances taken without security Includes ‡ Fixed deposits (Open ended) ‡ Unsecured bonds and debentures .

Liabilities  Current Liabilities   Are to be paid within a year. Includes ‡ ‡ ‡ ‡ ‡ ‡ ‡ Sundry creditors Bills payable Advance payments Bank overdraft Dividend payable Tax payable Outstanding/accrued expenses  Provisions  Provided to pay for short term liabilities ‡ Provisions for tax. insurance. .Balance Sheet Analysis . dividend(proposed).

patent. building. Plant & Machinery. . brand value etc. copyright.  Investments irreversible in nature  Two types:  ‡ Tangible Fixed Assets ± land. Vehicles etc. ‡ Intangible Fixed Assets ± goodwill.Assets  Fixed Assets Used for long period. furniture.Balance Sheet Analysis .

cash at bank. short-term investments. securities (gilts). sundry debtors.  Current Assets    . real-estate etc. WIP. marketable securities. shares. inventories ± RM.Balance Sheet Analysis .Assets  Investments   Done to get some returns out of surplus funds Investments made in govt. spares and tools. FG. prepaid exp. bills receivables. Assets used within a year Can be converted into cash Includes ± cash in hand.

Assets  Loans and Advances  Short term advances and loans  Deferred Expenditure    Exp.. of years and the written bal. Discount on issue of shares/bonds. Exp. .Balance Sheet Analysis . Spread over no. Shown in balance sheet. Includes ± preliminary exp. Not debited fully to the P/L A/c of the year in which they have been incurred.

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