2. Double Entry System 3 DRCR

3. FINANCIAL STATEMENTS

4. An Overview… General Journal Special Journals Ledger Accounts Trial Balance Prepare Simple Financial Statements Adjustments

5. Objectives At the end of the lesson, students should be able to : know the purpose of preparing Final Accounts. know what is a Trading Profit & Loss Statement. know how to draw up a Trading P & L statement and a Balance Sheet on the last day of the accounting period.

6. Opening Stock + Net Purchases – Closing Stock = Cost of goods sold Cost of goods sold + Gross Profit = Net Sales Cost price + Profit = Selling price

7. Trading Account for the year ended 31 Dec 2000 $$$$ Purchases Less: Returns Outwards Less: Closing Stock Costs of Gds Sold Gross Profit * XX (XX) XX (XX) XX Sales Less: Returns Inwards XX (XX) XX Opening Stock XX How does Trading a/c looks like?

8. Trading Account for the year ended 31 Dec 2000 $$$$ Purchases Less: Returns Outwards Less: Closing Stock Costs of Gds Sold Gross Profit * 12,000 (2,000) 11,000 (2,300) 8,700 12,900 Sales Less: Returns Inwards 23,000 (1,400) 21,600 Opening Stock 1,000 10,000 An Example

9. Net Profit = Gross Profit + Operating Revenues – Operating Expenses

10. How does Profit & Loss a/c looks like? Profit & Loss Account for the year ended 31 Dec 2000 $$ Expenses Net Profit ** Gross Profit * Revenues XX XX XX

11. Profit & Loss Account for the year ended 31 Dec 2000 $$ Rent Expense Insurance Expense Wages Depreciation Interest Expense Transport Expenses Net Profit ** Gross Profit * Commission Revenue Interest Revenue 12,900 7,500 1,000 21,400 1,000 3,400 7,000 3,000 1,200 2,580 3,220 An Example

12. Recall….Balance Sheet BALANCE SHEET AS AT 1 Jan 2000 BALANCE SHEET AS AT 1 Jan 2000 Owner’s Equity $ Capital Add: Profits Less: Drawings Long Term Liabilities Loan from bank Current Liabilities Creditors Other creditors Fixed Assets $ $ Fixed Assets $ $ Building Building Office Equipment Office Equipment Motor Vehicle Motor Vehicle Fixtures Fixtures Current Assets Current Assets Stock (*closing) Stock (*closing) Debtors Debtors Bank Bank Cash Cash Assets = Owner’s Equity + Liabilities Liabilities Same figure

13. BALANCE SHEET AS AT 1 Jan 2000 BALANCE SHEET AS AT 1 Jan 2000 Fixed Assets $ $ Fixed Assets $ $ Motor Vehicle 25000 Motor Vehicle 25000 Fixtures 10050 Fixtures 10050 35050 35050 Current Assets Current Assets Stock 4570 Stock 4570 Debtors 7400 Debtors 7400 Cash 630 Cash 630 12600 12600 47650 47650 Example A = OE + L Owner’s Equity $ Capital 38000 Long Term Liabilities Loan from bank 3000 Current Liabilities Creditors 6650

14. IN CLOSING…