Examples of Trading and
Profit and Loss Account and Balance Sheet:
Learning Objectives:
-
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 |
| |
|
|
|
