Learner will be able to prepare final statement of a business - Profit and loss account and Balance Sheet

1. Lecture by Srinivas M.
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2. Objectives
 Learner will be able to prepare final statement of a
business - Profit and loss account and Balance Sheet
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3. The process of
Accounting Cycle
ends with the
preparation of Final
Accounts .
So Let us begin
various steps to
compile final
accounts
Accounting Cycle :
• Journal
• Ledger
• Trial Balance
• Final Accounts
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4. Final Statements of
Sole Proprietor
comprise of preparing
the following
statements
• Trading and Profit
and loss account
• Balance Sheet
Before we move
further, let me
elaborate on some of
the new terms and
their meaning
Gross Profit = Net Sales – Cost of goods sold
Cost of goods sold= Opening Stock+ net purchases +
Direct Expenses – Closing Stock
Direct Expenses: These are incurred on
purchase and production of Expenses
Like , Carriage, freight, Octroi, Wages,
facrtory rent, Royalty
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5. To Opening
Stock
To Purchases
Less Purchase return
TO Direct
expenses
To Gross Profit
Rs
..
..
..
?
By Sales ..
Less Sales
return …
By Closing
Stock
Rs.
..
..
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7. Prepare a trading account of Mr.Devan for the year
ended 31st March 2015.
Opening stock 5,700
Purchases 1,58,000
Purchases returns 900
Sales 2,62,000
Sales returns 600
Closing stock was valued at Rs.8,600.
[Answer : Gross profit Rs. 1,07,200]
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8. The following are some of the balances extracted from the ledger
of Mr. Sundaram as on 31st December 2015. Prepare a trading
account.
Particulars Debit Rs. CreditRs.
Stock 1.1.2015 12,500
Purchases 1,00,000
Sales 1,50,000
Returns outwards 5,000
Returns inwards 10,000
Salaries 4,400
Wages 7,500
Rent 2,750
Carriage inwards 2,500
Carriage outwards 750
Power, coal, gas 1,000
Stock on 31.12.2015 was valued at Rs.14,000.
(Answer : Gross profit Rs. 35,500)
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9. Now Let us move
further to the
second part of the
income statement;
i.e Profit and loss
Account
To Indirect
Expenses and
losses
 Office and
Administration
Expense
Selling and
Distribution Expenses
Financial Expenses
Depreciation and
Repairs
Any other loss etc.
To Net Profit
Rs
..
..
..
?
By Gross
Profit
By Income
 Discount
Received
Commission
received
Interest Received
etc.
Rs.
..
..
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10. Salaries, Rent, stationery, Telephone Charges, legal expense ,
postage etc
:
Advertisement, Carriage outwards, Commission, showroom rent,
etc
Bank charges, interest on loan and on capital
Bad Debts, loss of goods by fire etc.
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12. Prepare profit and loss account of Mrs. Nandini for
the year ended 31st Dec. 2001 from the following.
Gross profit 1,25,000 Discount paid 600
Salaries 15,000 Discount received 1,000
Rent 5,000 Interest paid 500
Carriage outwards 1,000 Interest received 700
Selling expenses 500 Commission earned 2,000
Income from investment 1,500
[Answer : Net profit Rs.1,07,600]
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13. The following balances are taken from the books of M/s.
RGV Ltd. Prepare profit and loss account for the year
ended 31st March 2012.
Gross profit 5,25,000 Salaries & wages 1,00,000
Rent 10,000 Depreciation 5,000
Interest on loan 5,000 Office expenses 1,500
Distribution charges 2,500 Salesman salary 8,000
Bad debts 2,200 Stationery and printing 500
Commission received 3,000 Discount received 2,000
Interest received 5,000 Advertising 9,000
Taxes and insurance 2,000
[Answer : Net profit Rs. 3,89,300]
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14. 14
Balance sheet is a
statement prepared to
know the financial
position of the
business at the end of
the year ( that is
balances of Assets and
Liabilities)
Balance Sheet

15. 15
Fixed Assets
are long term
assets which are
not for sale in the
ordinary course
business.
Current Assets
are short term
assets, which
keep changing
from one form to
another within a
short period of
12 months

42. Have a wonderful day!!!
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