Trading Account and Profit and Loss
Account and Balance Sheet - An Example:
Learning Objectives:
-
Understand the procedure of
Preparing trading and profit and loss account and
balance sheet of a business.
The
following trial balance have been taken out from the
books of XYZ as on 31st December, 2005.
|
Dr.
$ |
Cr.
$ |
Plant
and Machinery |
100,000 |
|
Opening stock |
60,000 |
|
Purchases |
160,000 |
|
Building |
170,000 |
|
Carriage inward |
3,400 |
|
Carriage outward |
5,000 |
|
Wages |
32,000 |
|
Sundry
debtors |
100,000 |
|
Salaries |
24,000 |
|
Furniture |
36,000 |
|
Trade
expense |
12,000 |
|
Discount on sales |
1,900 |
|
Advertisement |
5,000 |
|
Bad
debts |
1,800 |
|
Drawings |
10,000 |
|
Bills
receivable |
50,000 |
|
Insurance |
4,400 |
|
Bank
balances |
20,000 |
|
Sales |
|
480,000 |
Interest received |
|
2,000 |
Sundry
creditors |
|
40,000 |
Bank
loan |
|
100,000 |
Discount on purchases |
|
2,000 |
Capital |
|
171,500 |
|
|
|
|
795,500 |
795,500 |
|
|
|
Closing
stock is valued at $90,000
Required: Prepare
the trading and profit and loss account of the
business for the year ended 31.12.2005 and a balance
sheet as at that date.
XYZ
Trading and Profit and Loss Account
For the year ended 31st, December 2005
|
|
|
|
|
|
|
Opening stock |
|
60,000 |
|
Sales |
480,000 |
|
Purchases |
160,000 |
|
|
Less
discount |
1,900 |
478,100 |
Less discount |
2,000 |
158,000 |
|
|
|
|
|
|
|
|
Closing
stock |
|
90,000 |
Carriage
inward |
|
3,400 |
|
|
|
|
Wages |
|
32,000 |
|
|
|
|
Gross profit
(transferred to P&L) |
|
314,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
568,100 |
|
|
|
568,000 |
|
|
|
|
|
|
|
Carriage
outward |
|
5,000 |
|
Gross
profit (transferred to P&L) |
|
314,700 |
Salaries |
|
24,000 |
|
Interest
received |
|
2,000 |
Trade expenses |
|
12,000 |
|
|
|
|
Advertisement |
|
5,000 |
|
|
|
|
Bad debts |
|
1,800 |
|
|
|
|
Insurance |
|
4,400 |
|
|
|
|
Net profit
(transferred to capital) |
|
264,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
316,700 |
|
|
|
316,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
Discount on purchases and discount on sales are
deducted from purchases and sales respectively. They
may be shown on the credit and debit side of profit
and loss account respectively and it will not affect
the net profit of the business. The gross profit
will be affected if discount is treated so.
XYZ
Balance Sheet
For the year ended 31st, December 2005
|
|
|
|
|
|
Assets |
$ |
|
Liabilities |
|
$ |
Current
Assets: |
|
|
Current
Liabilities: |
|
|
Bank balance |
20,000 |
|
Sundry creditors |
|
40,000 |
Bills receivable |
50,000 |
|
Bank loan |
|
100,000 |
Sundry debtors |
100,000 |
|
Fixed and Long
Term: |
|
|
Closing stock |
90,000 |
|
Capital |
171,500 |
|
Fixed
Assets: |
|
|
+Net profit |
264,500 |
|
Furniture |
36,000 |
|
|
|
|
Plant and Machinery |
100,000 |
|
-Drawings |
10,000 |
426,000 |
Building |
170,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
566,000 |
|
|
|
566,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|