Double Entry

System 3

DR CR
FINANCIAL STATEMENTS
 An Overview…
General Special
Journal Journals

Ledger Accounts

Trial Balance

Adjustments

Prepare Simple Financial Statements

 Objectives
At the end of the lesson, students should be able to :

• know the purpose of preparing Final Accounts.

• know what is a Trading Profit & Loss
Statement.
• know how to draw up a Trading P & L
statement and a Balance Sheet on the last
day of the accounting period.
Opening Stock
+ Net Purchases
– Closing Stock = Cost of goods sold

Cost price + Profit = Selling price

Cost of goods sold

+ Gross Profit = Net Sales
 How does Trading a/c looks like?

Trading Account for the year ended 31 Dec 2000

$ $ $ $
Opening Stock XX Sales XX
Purchases XX Less: Returns (XX) XX
Less: Returns (XX) XX Inwards
Outwards
XX
Less: Closing (XX)
Stock
Costs of Gds Sold XX
Gross Profit * XX
XX XX
An Example
Trading Account for the year ended 31 Dec 2000
$ $ $ $
Opening Stock 1,000 Sales 23,000
Purchases 12,000 Less: Returns (1,400) 21,600
Less: Returns (2,000) 10,000 Inwards
Outwards
11,000
Less: Closing (2,300)
Stock
Costs of Gds Sold 8,700
Gross Profit * 12,900
21,600 21,600
Net Profit = Gross Profit + Operating
Revenues – Operating Expenses
 How does Profit & Loss a/c looks like?

Profit & Loss Account for the year ended 31 Dec 2000
$ $
Expenses XX Gross Profit * XX

Net Profit ** XX Revenues XX

XX XX
An Example

Profit & Loss Account for the year ended 31 Dec 2000
$ $
Rent Expense 1,000 Gross Profit * 12,900

Insurance Expense 3,400 Commission Revenue 7,500

Wages 7,000 Interest Revenue 1,000

Depreciation 3,000
Interest Expense 1,200
Transport Expenses 2,580
Net Profit ** 3,220

21,400 21,400
 Recall….Balance Sheet
Assets = Owner’s Equity +
Liabilities
BALANCE SHEET AS AT 1 Jan 2000
Fixed Assets $ $ Owner’s Equity $
Building Capital
Office Equipment Add: Profits
Motor Vehicle Less: Drawings
Fixtures
Long Term Liabilities
Current Assets Loan from bank
Stock (*closing)
Debtors Current Liabilities
Bank Creditors
Cash Other creditors
Same figure
Example
A = OE + L
BALANCE SHEET AS AT 1 Jan 2000
Fixed Assets $ $ Owner’s Equity $
Motor Vehicle 25000 Capital 38000
Fixtures 10050
35050 Long Term Liabilities
Loan from bank 3000
Current Assets
Stock 4570 Current Liabilities
Debtors 7400 Creditors 6650
Cash 630
12600

47650 47650
IN CLOSING…