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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.

  $   $
Stock on 1st January 11,000 Returns outwards 500
Bills receivables 4,500 Trade expenses 200
Purchases 39,000 Office fixtures 1,000
Wages 2,800 Cash in hand 500
Insurance 700 Cash at bank 4,750
Sundry debtors 30,000 Tent and taxes 1,100
Carriage inwards 800 Carriage outwards 1,450
Commission (Dr.) 800 Sales 60,000
Interest on capital 700 Bills payable 3,000
Stationary 450 Creditors 19,650
Returns inwards 1,300 Capital 17,900

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   11,000 | By Sales 60,000  
To Purchases 39,000   |     Less returns i/w 1,300  
    Less returns o/w 500   |  
58,700
 
38,500 | By Closing stock   25,000
To Carriage inwards   800 |      
To Wages   2,800 |      
To Gross profit c/d   30,600 |      
   
|    
    83,700 |     83,700
   
|    
To Stationary   450 | By Gross profit b/d   30,600
To Rent and rates   1,100 |      
To Carriage outwards   1,450 |      
To Insurance   700 |      
To Trade expenses   200 |      
To Commission   800 |      
To Interest on capital   700 |      
To Net profit transferred to capital a/c   25,200 |      
|
   
|    
    30,600 |     30,600
   
|    

X & Co.
Balance Sheet
As at 31st December, 1991

Liabilities $ | Assets $
Creditors   19,650 | Cash in hand 500
Bills payable   3,000 | Cash at bank 4,750
Capital 17,900   | Sundry debtors 30,000
Add Net profit 25,200   | Bill receivable 4,500
 
43,100 | Stock 25,000
      | Office equipment 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 13,000
Sundry debtors 10,000  
Bill receivable 8,500  
Opening stock 45,000  
Building 50,000  
Furniture and fittings 10,000  
Investment (Temporary) 5,000  
Plant and Machinery 15,500  
Bills payable   9,000
Sundry creditors   20,000
Habib's capital   78,200
Habib's drawings 1,000  
Sales   100,000
Sales discount 400  
Purchases 30,000  
Freight in 1,000  
Purchase discount   500
Sales salary expenses 5,000  
Advertising expenses 4,000  
Miscellaneous sales expenses 500  
Office salary expenses 8,000  
Misc. general expenses 1,000  
Interest income   1,000
Interest expenses 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   100,000  
Less: Sales discount   400  
       
 
Net Sales     99,600

Cost of Goods Sold:
     
Opening stock   45,000  
Purchases 30,000    
Add: Freight in 1,000    
 
   
  31,000    
Less purchase discount 500    
 
   
Net purchases   30,500  
   
 
Cost of goods available fort sale   75,500  
Less closing stock   10,000  
   
 
Cost of goods sold     65,500
     
Gross profit     34,100

Operating Expenses:
     
Selling Expenses:      
   Sales salary expenses 5,000    
   Advertising expenses 4,000    
   Misc. selling expenses 500    
 
9,500  
General Expense:      
   Office salaries expenses 8,000    
   Misc. general expenses 1,000    
 
9,000  
   
 
Total operating expenses     18,500
     
Net profit from operations     15,600

Other Expenses and Incomes:
     
Interest income 1,000    
Interest expenses 800    
 
   
Net increase     200
     
Net income     15,800
     

Habib-ur-Rehman
Balance Sheet
As at December 31, 19.....

ASSETS    
   Current Assets:    
      Cash 13,000  
      Sundry debtors 10,000  
      Bills receivable 8,500  
      Stock on Dec. 31, 19 .. 10,000  
      Investment 5,000  
 
 
         Total Current Assets   46,500
   Fixed Assets:    
      Buildings 50,000  
      Plant and Machinery 15,500  
      Furniture and fittings 10,000  
 
 
         Total Fixed Assets   75,500
   
         Total Assets   122,000
   
     
LIABILITIES:    
   Current Liabilities:    
      Sundry creditors 20,000  
      Bills payable 9,000  
 
 
         Total Current Liabilities   29,000
   Fixed Liabilities:    
      Habib's capital 78,200  
      Net income for the year 15,800  
 
 
  94,000  
      Less: Drawings 1,000  
 
93,000
   
      Total Liabilities and Capital   122,000
   

Recommended Books !


You may also be interested in other articles from "final accounts" chapter:

  1. Trading Account
  2. Profit and Loss Account
  3. Difference Between Trading Account and Profit and Loss Account
  4. Balance Sheet
  5. Difference Between Trial Balance and Balance Sheet
  6. Examples of Trading and Profit and Loss Account and Balance Sheet

 

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