Measurement of Profit and Financial Position: II Trial Balance to Balance Sheet and Profit and Loss Account: Non

Corporate Entities
By Prof. Neha Patel

From Trial Balance to Balance Sheet and Profit & Loss statement Trial Balance Analysis of Trial Balance Adjustments Inventory Valuation Construction of Financial Statement Balance Sheet P & L Account Brief Analysis of Results .

incomes & expenses . liabilities. it is assumed that organization will continue in operation for foreseeable future  This is the basic reason for analyzing accounts into assets.Analysis of Trial Balance  Going Concern Concept  Under this concept.

Salary Expenses .)  Capital Expenditure  The benefit of this expense accrues over a long period of time  E. Fixed Assets  Revenue Expenditure  The benefit of this expenditure expires within a year  E. Stationery Expenses..g.g.Analysis of Trial Balance (cont.

Current Assets like Cash .g.Analysis of Trial Balance (cont.)  Capital Receipts  The benefit of these incomes accrue over a long period of time  E. Long-term Loans  Revenue Receipts  The benefit of this income expires within a year  E.. Owner’s Capital.g.

 It must be correlated with all the expenses which lead to generation of such income To figure out the value of inventory at the end of a particular period using methods like:  FIFO  LIFO  Inventory Valuation  .Need for Adjustments  Matching Principle  While recording income in profit & loss statement.

Construction of Balance Sheet and Profit & Loss Account  Profit & Loss statement   Displays the income & expenditure of the concern The retrospect impact of the same on the profits or losses of the business Displays the amount of Assets & Liabilities accumulated by the business  Balance Sheet  .

Incomes &  Expenses .Profit & Loss Statement  Gross Profit  It is the difference between  Net Sales &  Cost of Goods Sold (COGS)  Net Profit  It is the difference between  Gross Profit.

Instructions for preparing the 2 Financial Statements  Draw both the statements Simultaneously  Figure out to which head & which account trial balance account entries Belong to  Post entries in Financial Statements after Adjustments  Find out the value & amount of Closing Inventory .

)  Work out Profit or Loss from P&L Statement  Post this prepare Balance Sheet  If the calculations are correct both sides of the Balance Sheets must match  While Calculating for both the statements make sure you make adjustments for depreciation according to the time frame of accounts ..Instructions for preparing the 2 Financial Statements (cont.

Case Study Discussion  Monik Traders Case Study  Refer to Excel File  Prepare Profit & Loss Statement &  Balance Sheet .

Thank You!! .

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