The document discusses key accounting concepts including the profit and loss account, balance sheet, assets and liabilities. It provides examples of vertical and horizontal presentations of the profit and loss account. It also discusses the classification of assets and liabilities as current, long-term, or fixed on the balance sheet. Rules for debit and credit entries are explained for increases and decreases in assets and liabilities.

1. Financial Accounting
1
Lecture – 09
Profit and Loss Account (Vertical Presentation)
15,000Net Profit
(gross Profit – expenses)
100,000Income60,000Cost of Sale
CreditDebit
40,000Gross Profit15,000
5,000
5,000
Admin Expenses
Selling Expenses
Financial Expense
Total
Total
Gross Profit
(income – Cost of Sale)
Particulars
40,000Total40,000
100,000Total100,000
40,000
Amount Rs.ParticularsAmount Rs.
Profit and Loss Account for the Period Ending ----
Name of the Entity

2. Financial Accounting
2
Lecture – 09
Profit and Loss Account (Horizontal Presentation)
15,000Net Profit
40,000
(25,000)
(15,000)
(5,000)
(5,000)
Gross Profit
Less: Administrative Expenses
Selling Expenses
Financial Expenses
100,000
(60,000)
Income / Sales / Revenue
Less: Cost of Goods Sold
Amount
Rs.
Amount
Rs.
Particulars
Profit and Loss Account For the Period Ended ----
Name of the Entity

3. Financial Accounting
3
Lecture – 09
The Balance Sheet
• Balance Sheet – A statement of financial position of the
entity.
• It shows the financial position of the organization at a
Specific Time.

4. Financial Accounting
4
Lecture – 09
Assets, Liabilities

Asset is any owned physical object (tangible asset) or a
right (intangible asset) having economic value to the
owner.

Liability is an obligation of the business to deliver goods
or provide a benefit in future.

5. Financial Accounting
5
Lecture – 09
Rules of Debit and Credit
• ASSETS

Increase in Asset is Debit

Decrease in Asset is Credit
• LIABILITY

Increase in Liability is Credit

Decrease in Liability is Debit
See
Lecture 5

6. Financial Accounting
6
Lecture – 09
• Capital – is the funds invested by the owners of the
business.
• Profit and Loss Account – The net balance of the profit
and loss account (i.e. either profit or loss also belongs to the owners and business is
liable to the owners for these funds.)
• Long Term Liabilities – these are the liabilities that will
become payable after a period of more than one year of the
balance sheet date.
• Current Liabilities – These are the obligations of the
business that are payable within twelve months of the
balance sheet date.
Classification (Liabilities)

7. Financial Accounting
7
Lecture – 09
• Fixed Assets – Are the assets of permanent nature that a
business acquires, such as plant, machinery, building,
furniture, vehicles etc.
• Long Term Assets – These are assets that are not fixed but
their life is more than twelve months the balance sheet.
• Current Assets – Are the receivables that are expected to
be received within one year of the balance sheet date
Classification (Assets)

8. Financial Accounting
8
Lecture – 09
Balance Sheet
75,000Fixed Assets100.000Capital
AssetsLiabilities
10,000Current Liabilities
Total
Long Term Liabilities
Profit and Loss Account
Particulars
175,000Total175,000
80,000Current Assets115,000
50,000
20,000Long Term Assets15,000
Amount
Rs.
ParticularsAmount
Rs.
Balance Sheet As At ----
Name of the Entity

9. Financial Accounting
9
Lecture – 09
Balance Sheet
50,000
10,000
Long Term Liabilities
Current Liabilities
175,000Total
175,000Total
115,000
100,000
15,000
Liabilities
Capital
Profit
75,000
20,000
80,000
Assets
Fixed Assets
Long Term Assets
Current Assets
Amount Rs.Amount Rs.Particulars
Balance Sheet As At ----
Name of the Entity

10. Financial Accounting
9
Lecture – 09
Balance Sheet
50,000
10,000
Long Term Liabilities
Current Liabilities
175,000Total
175,000Total
115,000
100,000
15,000
Liabilities
Capital
Profit
75,000
20,000
80,000
Assets
Fixed Assets
Long Term Assets
Current Assets
Amount Rs.Amount Rs.Particulars
Balance Sheet As At ----
Name of the Entity