Examples of Trading and Profit and Loss Account and Balance Sheet: Learning Objectives:
1. Prepare trading and profit and loss account and balance sheet.
Example 1: From the following balances extracted from the books of X & Co., prepare a trading and profit and loss account and balance sheet on 31st December, 1991. $ 11,000 4,500 39,000 2,800 700 30,000 800 800 700 450 1,300
Stock on 1st January Bills receivables Purchases Wages Insurance Sundry debtors Carriage inwards Commission (Dr.) Interest on capital Stationary Returns inwards
$ 500 200 1,000 500 4,750 1,100 1,450 60,000 3,000 19,650 17,900
Returns outwards Trade expenses Office fixtures Cash in hand Cash at bank Tent and taxes Carriage outwards Sales Bills payable Creditors Capital
The stock on 21st December, 1991 was valued at $25,000.
Solution: X & Co.
Trading and Profit and Loss Account For the year ended 31st December, 1991 To Opening stock To Purchases Less returns o/w
To Carriage inwards To Wages To Gross profit c/d
11,000 39,000 500
|By
Sales Less | returns i/w |
800 2,800 30,600
|
1,300 58,700
|
38,500
60,000
By Closing stock
25,000
| | |
83,700
83,700
| |
To Stationary
450
|By
Gross
30,600
profit b/d To Rent and rates To Carriage outwards To Insurance To Trade expenses To Commission To Interest on capital To Net profit transferred to capital a/c
1,100
|
1,450
|
700 200 800
|
700
|
25,200
| |
| | |
30,600
30,600
| |
X & Co.
Balance Sheet As at 31st December, 1991 Liabilities Creditors Bills payable Capital Add Net profit
$ 19,650 3,000 17,900 25,200 43,100
|
Assets Cash in hand | Cash at bank | Sundry debtors | Bill receivable | Stock | Office equipment |
$ 500 4,750 30,000 4,500 25,000 1,000
|
65,750
|
65,750
|
Example 2: The following trial balance was taken from the books of Habib-ur-Rehman on December 31, 19 .... Cash Sundry debtors Bill receivable Opening stock Building Furniture and fittings Investment (Temporary) Plant and Machinery Bills payable Sundry creditors Habib's capital
13,000 10,000 8,500 45,000 50,000 10,000 5,000 15,500 9,000 20,000 78,200
Habib's drawings Sales Sales discount Purchases Freight in Purchase discount Sales salary expenses Advertising expenses Miscellaneous sales expenses Office salary expenses Misc. general expenses Interest income Interest expenses
1,000 100,000 400 30,000 1,000 500 5,000 4,000 500 8,000 1,000 1,000 800 2,08,700
2,08,700
Closing stock on December 31, 19 ... was $10,000 Required: Prepare income statement/trading and profit and loss account and balance sheet from the above trial balance in report form.
Solution: Habib-ur-Rehman Income Statement/Profit and Loss Account For the year ended December 31, 19.....
Gross sales Less: Sales discount
100,000 400
Net Sales
99,600
Cost of Goods Sold: Opening stock Purchases Add: Freight in
30,000 1,000
Less purchase discount
31,000 500
45,000
Net purchases
30,500
Cost of goods available fort sale Less closing stock
75,500 10,000
Cost of goods sold
65,500
Gross profit
34,100
Operating Expenses: Selling Expenses: Sales salary expenses Advertising expenses Misc. selling expenses
5,000 4,000 500 9,500
G eneral
Expense: Office salaries expenses Misc. general expenses
8,000 1,000 9,000
Total operating expenses
18,500
Net profit from operations
15,600
Other Expenses and Incomes: Interest income Interest expenses
1,000 800
Net increase
200
Net income
15,800
Habib-ur-Rehman
Balance Sheet As at December 31, 19..... ASSETS Current Assets: Cash Sundry debtors Bills receivable Stock on Dec. 31, 19 .. Investment Total Current Assets Fixed Assets: Buildings Plant and Machinery Furniture and fittings Total Fixed Assets
13,000 10,000 8,500 10,000 5,000 46,500 50,000 15,500 10,000 75,500
Total Assets
LIABILITIES: Current Liabilities: Sundry creditors Bills payable Total Current Liabilities Fixed Liabilities: Habib's capital Net income for the year
Less: Drawings
122,000
20,000 9,000 29,000 78,200 15,800 94,000 1,000 93,000
Total Liabilities and Capital
122,000
