Final Accounts - Principles Of Accounting
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http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Final Accounts THE FINAL ACCOUNTS OF A SOLE TRADER The trading account, profit and loss account and the balance sheet are called final accounts. Usually, the final accounts are prepared at the end of an accounting period. * Trial balance is the basis for preparing the final accounts.
TRADING AND PROFIT & LOSS ACCOUNT
The purpose of preparing the trading account is to find out the gross profit or gross loss of the business during an accounting period.
The purpose of preparing the profit and loss account is to find out the net profit or net loss of the business for an accounting period
Gross Profit
=
Gross Loss
=
Net sales – Cost of goods sold Cost of goods sold – Net sales
/ http://www.principlesofaccounting2.com/ Net Profit
=
Gross Profit + Incomes – Expenses
Net Loss
=
Expenses – Incomes – Gross Profit
Note:
Net sales
=
Total sales – Sales returns/ Return Inwards.
Cost of goods sold
=
Opening stock + Purchases + Carriage Inwards
– Return Outwards/ Purchase Returns – Closing Stock Format of the Trading & Profit and Loss Account (Vertical Form)
Sales Less: Return Inwards LESS: COST OF GOODS SOLD Opening Stock Add: Purchases Add: Carriage Inwards Less: Return Outwards Less: Closing Stock
$ xxxxxx
$
xxxx
xxxxxx
xxxxx xxxxxxx xxxx xxxxxx xxxx xxxxxxx xxxxx
xxxxxx xxxxxxx
xxxx
(+)
GROSS PROFIT/ GROSS LOSS Add: Incomes: Discount Received Interest Received Commission Received etc.
(–)
xxxx xxxx
xxxxx xxxxx
LESS: EXPENSES Rent paid Commission paid Discount allowed Interest paid Salary paid Power charges/ electricity charges Telephone charges
xxxx xxxx xxxx xxxx xxxx xxxx
(–)
xxxx xxxx
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Licence & taxes Depreciation on fixed assets Advertisement expenses Selling expenses
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xxxx xxxx xxxx
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xxxx xxxx
Carriage outwards/ carriage on sales Repairs to fixed assets etc.
xxxx xxxxxx
NET PROFIT/ NET LOSS
BALANCE SHEET This is the statement of assets and liabilities of a business prepared on a particular date to show the financial position of a business. The Balance sheet is prepared after the preparation of the trading, profit and loss account.
The balance sheet is prepared with the account balances left after the preparation of the trading and profit & loss account.
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Usually, the trading account and the profit and loss account are prepared together. But the balance sheet is prepared separately.
Format of the Balance sheet of a sole trader (Vertical form) Balance sheet of Mr. Ahmed, as at 31st December 2001 $
$
Fixed Assets: Plants & Machinery
$
xxxx xxxx
Land & Buildings Motor cars
xxxx xxxx
Furniture & Fixtures Motor vehicles
xxxx xxxx
Fixtures & Fittings Premises etc
xxxxxx
xxxx
Current Assets: Stock (Closing)
xxxx xxxx
Debtors Cash in hand
/ http://www.principlesofaccounting2.com/ xxx xxxx
Cash at bank Expenses prepaid
xx xx
Accrued incomes
xxxxxx Less: Current Liabilities Creditors Bank Overdrafts Expenses owing Income received in advance Working capital
xxxx xxx
(-)
(+)
Xx Xx
xxxx xxxxx xxxxx (+)
Long Term Liabilities: xxxx
Loan from the Bank Loan from other financial
xxxx
xxxx
Institutions Xxxxxx (+)/ (-) xxxx
Add: Net Profit/ Less : Net Loss Less : Drawings
xxxxx (-)
(Cash & Goods)
xxx
Xxxxxx Xxxxxx
Assignment Questions: Q. 1
The excess of net sales over the cost of goods sold in a particular period is called :
(a) gross profit
Q. 2
(b) gross loss
(c) trading a/c
(d) none of these.
When the Gross profit is more than the total business expenses, the difference is called:
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ (a) net loss
Q. 3
(b) net Profit
(c) cost of goods sold
(d) none of these.
At the end of the year, the net profit should be credited in the
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(a) drawings a/c (b) profit and loss a/c
Q. 4
(c) balance sheet
Carriage on goods out of the firm is called:
(a) carriage inwards
(b) carriage outwards
(c) carriage on purchase
(d) none of these.
Q. 5
(d) capital a/c
Bank overdraft is an example of a
(a) current asset (b) current liability (c) long term liability
(d) current asset
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Q.6 (a)
The cost of putting goods into a saleable condition should be charged to the trading a/c
(b)
profit & loss a/c
(c)
balance sheet
(d)
manufacturing a/c
Q.7
The net profit is added to capital by:
(a)
debiting in the capital a/c
(b)
crediting in the Trial balance
(c)
crediting in the capital a/c
(d)
debiting in the cash a/c
Q. 8
Which of the following is correct?
(a)
Profit increases the drawings
(b)
Profit reduces the capital
(c)
Profit does not affect any item
(d)
Profit increases capital
Q. 9
Name the account which should not be included in the Profit & Loss a/c:
/ http://www.principlesofaccounting2.com/ (a)
Sales office expenses
(b)
Wages and Salaries
(c)
Carriage on Purchase
(d)
Carriage on sales
Q. 10
Net profit is calculated in the:
(a)
sales a/c
(b)
profit & loss a/c
(c)
trading a/c
(d)
balance sheet
Q. 11
The transportation cost for bringing the goods into the business is:
(a)
travelling expenses
(b)
carriage inwards
(c)
carriage outwards
(d)
motor expenses
Q. 12
Rent paid for the subsequent period is a
(a)
current liability
(b)
long term liability
(c)
current asset
(d)
none of the above.
Q. 13
Insurance is paid in advance by $ 150. What does it mean?
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ (a)
The business has used $ 150
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(b)
The business has unused $ 150
(c)
The business owes $ 150
(a)
None of the above.
Q. 14
A trader’s Turnover for the year were $ 3, 56,000, and his purchases were
$ 2,68,000. The stock at the beginning of the year was $ 31,400 and the stock at the end was $ 34,600. He had returned goods to his suppliers for $ 2,600
What is his gross profit for the year?
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ (a)
$ 86,200
(b)
$ 90,600
(c)
$ 91,200
(d)
$ 93,800
Q. 15
A business has fixed assets $ 10,000. Its current assets is $ 6,000,
working capital $ 2,000 and balance sheet total is $ 12,000 what is the amount of its current liability? (a) $ 1,000
(b) $ 2,000
(c) $ 3,000
(d) $ 4,000
Q. 16
Fill in the following with most suitable terms
1)
Working capital is the difference between ———— ————- &—– ————
2)
Gross profit = ————————- less
3)
————————————-.
In the final accounts, the closing stock is shown in the —————————- a/c
and in the ————-
/ http://www.principlesofaccounting2.com/ 4)
Bank overdraft is shown in the balance sheet as —— ——– ———————–.
5)
Drawings are usually deducted from ———————.
6)
Net profit is added to ———————-.
7)
In the balance sheet, the working capital is added to the total of ———————
8)
To find the amount of working capital, current liabilities total is deducted from
————- ———————— total 9)
The net profit is the difference between ——————— and———————–
10)
Expense prepaid is an example of ——————- asset.
11)
Expense payable is an example of ——————— ——————
12)
Net sales – cost of goods sold = ——————————————–
13)
Net sales = Sales less —————————–
14)
A loan taken from the bank, repayable after 5 years will be shown as —————
————15)
—————————- in the balance sheet
In the final accounts, the carriage inwards is taken to calculate the ——————
16)
The total of income is added to ————————————-
17)
Last year’s closing stock is the current year’s ——————————–
18)
The principle of valuation of closing stock is ——————————
19)
Closing Capital = opening Capital + Net profit (or – Net loss) ———————-
20)
The balance sheet is prepared to know the ———————————————-
21)
The purpose of preparing trading account is to calculate the———- ————-
or ——————— ———————22)
The profit & loss account is prepared to calculate the ———— ———– or
———- ——23)
Expenses – Incomes – Gross profit= —————————————
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The balance sheet is a statement of —————————- &————————
25)
———————– are the cost of operating the business.
26)
The balance sheet is not a part of —————————————————
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27)
Q. 17
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The trading and profit & loss account and balance sheet are known as ————-
The following trial balance was extracted from the books of a business for the
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ year ended 31st December 2002
Account Balances
debit
credit
$
$ 50,000
Capital Plants & Machinery Salaries
18,000 10,000
Repairs Wages
1,600 28,000
Cash in Hand Land & Buildings
2,500 74,500 1,23,500
Purchases Sales
2,49,000 3,800 8,500
Bank balance Discounts Commissions Debtors & Creditors
45,000
Bad debts Stock 0n 1.1.2002
1,000 37,000
Advertising Office expenses
600 1,000
Fixtures & fittings Stationery
4,000 400
Interest Rent & Rates
2,000 1,500
1,500 26,300
/ http://www.principlesofaccounting2.com/ Bank Loan Total
3,50,600
11,500 3,50,600
The closing stock on 31.12.2002 was valued at $ 28,000 Required to Prepare:
(a)
Trading, Profit & loss account for the year ended
31.12.2002 (b)
Q. 18
Balance sheet as at 31.12.2002
The following trial balance has been extracted from the books of Slim Traders
for the year ended 31st December 2001:
Account Balances
debit $
$ 1,98,000 700
Sales Discount received Bank interest Purchases Carriage outwards Carriage inwards
credit
200 53,000 4,900 2,000
Bad debts Rent
300 44,100
Office salaries Sales commission
26,200 37,600
Discount allowed Stationery
100 2,400
Advertising Electricity
8,700 7,200
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Cash at bank
Stock on 1st January 2001 Debtors & creditors
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4,700 39,000 10,000 8,000
11,300
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Office furniture Delivery van
37,300 29,000
Premises – cost Loan from State Bank (repayable in
22,000
2012) Capital
98,300 14,000 2,000
Drawings Interest on loan
3,30,500
Total
3,30,500
The closing stock on 31.12.2001 was valued at $ 41,000
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Prepare (a)
The trading, profit & loss account for the year ended 31st December 2001
(b)
The balance sheet of the business as at 31st December 2001
Q. 19
The following trial balance was extracted from the books of a sole trader for the
year ended 31st December 2000: Account Balances
debit
credit
$
$
Salaries and wages
4,200
Insurance Administrative expenses
1,200 2,670
Selling expenses Carriage on purchases
3,180 2,700
Returns Cash in hand
400 1,255
700
725
Carriage outwards Bank overdrafts
7,900 7,550
12,000 31,280
Land and Buildings Debtors & Creditors
29,500 21,000
9,600
Plants & Machinery Purchases and Sales
25,000 93,250
1,60,400
Equipments Stock of goods (on 1.1.2000)
20,000 8,250
Loan from ICICI Bank Drawings & Capital
/ http://www.principlesofaccounting2.com/ 1,000 Interest on Bank Loan 2,21,880 2,21,880 Total The closing stock on 31.12.2000 was valued at $ 14,700 Required: (a) (b)
The trading, profit & loss account for the year ended 31.12.2000
The balance sheet as at 31.12.2000
Q. 20 The following trial balance was extracted from the books of a sole trader for the year ended 31st March 2002:Debit Balances Purchases
AmountCredit Balances 37 000Sales
Returns Inwards Opening stock Carriage inwards Wages
2 004Returns Outwards 8 851Discount received 456Interest received 16 251Creditors
Travelling expenses Repairs
237Bank Loan 1 198Capital 435 518
Rent paid Furniture & Fittings
2 450 2 650
Plants & Machinery Motor Vehicles
13 840 6 825
Discount allowed Lighting & heating
Debtors Cash in hand
4 675 1 384
Cash at bank Salaries
4 718 19 900
Amount 96 000 195 480 1 150 12 133 1 000 20 184
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ 7 750 Total 1 31 142 Closing stock was valued at $ 9534 Drawings
Total
1 31 142
Prepare (a) The trading, profit & loss account for the year ended 31st March 2002
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(b) The balance sheet as at 31st March 2002 Q. 21
From the following trail balance prepare a set of final accounts for the year
ended 31st December 2002 $Credit 92,300Sales 5,200Capital 5,000Creditors
Debit Purchases Carriage inwards Drawings Rent, Rates & Insurance
$ 1,90,300 59,400 13,200
4,500Commission received 3,000Discount received
Postage Stationery
7,000 3,920
2,700Returns outwards 55,000
Machinery Buildings
700
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ 45,000 15,000
Fixture & Fittings Opening stock
1,000 2,500
Bank balance Cash balance
1,800 14,500
Debtors Discount allowed
250 800
Bad debts Salaries & wages
22,120 1,850
Advertising Carriage outwards Returns inwards Total
1,200 800 2,74,520
Total
2,74,520
The closing stock on 31st December 2002 was $ 12,400
Q 22. The following trial balance was extracted from the books L.Stokes, a sole trader, as at 31st March 2003:Account balances Drawings and capital Cash at bank Debtors and creditors Purchases & sales
Debit $ 3 000
Credit $ 70 000
1 800 24 000
14 000
58 600 600
78 023 700
/ http://www.principlesofaccounting2.com/ Returns Carriage outwards
700 1 350
Carriage inwards Salaries & wages
12 370 630
Commission paid Interest
1 240 700
Bad debt Depreciation
4 500 188
General expenses Plant & machinery
12 000 30 000
Building and land Furniture & fixtures
4 000 500
Cash in hand Opening stock
6 000 1 400
Discount on purchases Discount on sales
825 2 120
Telephone charges Salaries payable
1 65 123
Total
1 000 1 65 123
The closing stock is valued at $ 17 000 From the above information, prepare a set of final accounts for the year ended 31st March 2003
Q 23. Prepare the trading & profit & loss account for the year ended 31st Dec 2003 and a balance sheet on that date from the following balances extracted from the books of a business
Opening stock Closing stock Discount received Discount allowed Purchases Sales
$ 16 000Carriage outwards 4 000Returns inwards 3 000Returns outwards 1 500Salaries & wages 60 000Machinery 1 00 000Rent paid 950Power charges
$ 250 150 450 4 400 20 000 1 000 300
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Carriage inwards Drawings Capital Motor car
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5 300Commission received 28 250Repairs to machinery 25 000General expenses
3 500 750 100
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450Salary received 5 000Creditors
Advertisement expenses Debtors
1 950 4 000
Q 24. The following trial balance is extracted form the books of a sole trader for the year ended 31st Dec 2003:$Credit balances 47 000Sales 7 300Return outwards 30 000Commission received
Debit balances Debtors Drawings Opening stock
$ 2 30 000 3 500 3 100
26 350Rent received 14 500Discount received 17 400Loan from bank 29 600Capital
Motor car Land Equipment Petty cash balance
1 200 5 700 29 000 1 50 000
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Insurance Return inwards
3 000Interest received 2 160Creditors 9 900Loan from Ali 5 000Bank overdraft
Carriage outwards Building repairs
2 550 8 690
Bad debts Communication expenses
30 000 4 960
10 754 1 83 000
Motor car diesel expenses Purchases
1 000 4 900
Stationery expenses Electricity charges
21 700 42 700
Machinery Cash balance
6 746 4 400
Rent paid Wages paid License and taxes Total
4 900 17 190
900 4 79 550 Total
4 79 550
The stock on 31st Dec 2003 was valued at $ 50 000 Prepare the trading & profit & loss account for the year ended 31st Dec 2003 and a balance sheet as on that date
Q 25. The following trial balance was taken from the books of a business for the year ended 31st Dec 2003:-
/ http://www.principlesofaccounting2.com/ Debit $
Credit $
Purchases & sales Returns in & out
14 282 111
42 380 333
Carriage inwards Carriage outwards
322 666
Account balances
Debtors & Creditors Opening stock
11 380 1 004
Salaries & wages Cash in hand
5 555 444
Bank Depreciation
2 333
223 1 000
Salaries owing Rent & rates
600
Commission Discounts
188
Plant Machinery
6 000 7 000
Furniture& fixtures Advertising
4 000 1 023
Insurance Heating & lighting
711 501
Bad debts written off Bank loan(long term)
105
Interest on bank loan Insurance prepaid
200 50
Repairs to machinery Capital
101
Total
6 777
400 244
2 000
3 219 56 576
56 576
The stock at 31st Dec 2003 was valued at $ 2 040.
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Prepare a set final accounts for the year ended 31st Dec 2003
Q 26. The following account balances are extracted from the books of a sole trader for the year ended 31st Dec 2003:-
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Plant & machinery Land & buildings Furniture Fixtures Cash in hand Returns inwards Purchases Salaries & wages Insurance Stationery Discount allowed
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$ 40 000Office expenses 50 000Electricity charges 10 000Returns outwards
$ 1 800
5 000Capital 2 400Lighting & heating 800Carriage inwards 72 400Opening stock
81 000 1 100
750 2 700
2 100 6 100
21 000Discount received 5 000Commission received 1 050Postage expenses 1 000Bank overdraft
1 200 2 000 250 4 500
http://principlesofaccounting2.com/ http://principlesofaccounting2.com/ Debtors Rates & taxes
Sales General expenses Bank loan
12 000Bad debts 1 250Creditors 1 20 000Selling expenses 700Closing stock
400 6 500 500 7 200
17 700
You are required to prepare : a. The trial balance at 31st Dec 2003. b. The trading & profit & loss account for the year ended 31st Dec 2003. c. The statement showing the financial position of the business as at 31st Dec 2003. Incoming search terms:
accounting for losses in a return inward difference between final account and cost accounting how will you show the following item(a)drawings(b)return inwards(c)returnoutwards in which final account will sales returns be shown principles of accounting final accounting PROFIT &LOSS A/C FOR THE YEAR ENDED 31-12-2000 where do you put carriage inwards in the trading account where do you put freight inwrds and outwards charges on cost of goods sold
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