Presentation on theme: "References： Chapter 7 to 10 (P )"— Presentation transcript:
1 References： Chapter 7 to 10 (P. 59-113) 2Final AccountsReferences：Chapter 7 to 10 (P )
2 A Trial Balance (試算表)A trial balance is a list of debit balances and credit balances in the books of accounts。The total of debit balances and the total of credit balances are equal. If not, errors are needed to identitied.Trial balance is the basis for preparing final accounts (Trading and profit and loss A/C; Balance Sheet).
3 Examples of Trial Balance： Leungs CompanyTrial Balancefor the year ended 31 December, 2008$ $SalesReturns inwards 10Stock as at 1 January,PurchasesReturns outwardsCarriages inwards 10Rental incomeCommission received 50RentCommissionElectricityRates
4 Stock as at 31 December, 2008 is $120 $ $Land and buildingOffice FurnitureFittingsOffice equipmentMachineryMotor vehiclesDebtorsBankCashCreditorsBank overdraftCapitalDrawingsBank loanLoan－Mr. CheungStock as at 31 December, 2008 is $120
5 B Trading A/C Function: Calculate the gross profit or gross loss. Net Sales>Cost of salesFunction:Calculate the gross profit or gross loss.Net Sales－Cost of goods sold ＝ Gross profit /Gross lossNet Sales =Sales – ReturnsinwardsCost of goods sold =Opening stock ＋(Net Purchases+Carriage inwards)- Closing stockGross loss:Cost of sales>Net salesNet Purchases =Purchases – Returnsoutwards
6 Put the above formulas (算式) into a statement, a Trading A/C is formed. Trading A/c has vertical form and horizontal form.
7 for the year ended 31 December, 2008 Examples of vertical form：Leungs CompanyTrading A/Cfor the year ended 31 December, 2008$ $ $SalesLess：Returns inwardsNet SalesLess：Cost of goods soldStock as at 1 January,Add：Purchases 530Less：Returns outwards 20Net purchases 510Add：Carriage inwards620Less：Stock as at 31 December,Gross profit
8 for the year ended 31 December, 2008 Examples of horizontal form（T form）Leungs CompanyTrading A/Cfor the year ended 31 December, 2008$ $ $Opening Stock SalesAdd：Purchases Less：Returns inwards 10Less：Returns outwards Net Sales 1000Net purchasesAdd：Carriage inwards620Less：Closing stockCost of goods soldGross profit c/d
9 C Profit and loss A/C Functions: calculate the net profit / net loss. Gross profit+Income>ExpensesGross profit＋Other income－Expenses＝Net profit / Net lossNet loss:Expenses>Gross profit+IncomeOther income=rental income + commission income+…Expenses=rent and rates+commission+electricity+ …
10 Put the above formulas (算式) into a statement, a Profit and loss A/C is formed. Trading A/c has vertical form and horizontal form.
11 for the year ended 31 December, 2008 Vertical form：Leungs CompanyProfit and lossfor the year ended 31 December, 2008$ $Gross profitAdd： Rental incomeCommission income 50650Less：ExpensesRentCommission 30ElectricityRatesNet Profit
12 for the year ended 31 December, 2006 Examples of horizontal form (T form)：Leungs CompanyProfit and loss A/Cfor the year ended 31 December, 2006$ $Rent Gross profit b/d 500Commission 30 Rental income 100Electricity 150 Commission income 50Rates 50Net profit 300
13 Assets*＝Liabilities**＋Capital*** D Balance SheetBalance sheet is a statement to record the balances of assets, liabilities and capital at the end of the accounting period.Assets*＝Liabilities**＋Capital****Assets＝Non-current assets＋Current assets**Liabilities＝Current liabilities＋Long-term liabilities***Capital:Opening capital＋Net profit－Capital＝Closing capital
14 D1 Non-current AssetsNon-current assets have a long life and are to be used in the business.The non-current assets is not bought for resale.E.g. Land and building, Furniture, Fixtures and fitting, Office equipment, Machinery, Motor vehicles…
15 Non-current assets are listed in the order of “permanency” in the Balance Sheet are as follows: Land and buildingFurnitureFixtures and fittingsOffice equipmentMachineryMotor vehicles
16 D2 Current assetsCurrent assets are likely to be converted into cash in the short term (i.e. within 1 year) or items having a short life.E.g. Stock, Debtors, Prepayment, Bank, Petty cash, Cash…
17 Current assets are listed starting the most difficult to be turned into cash, and the last one is “Cash”:Current assetsStockDebtorsPrepaymentBankCash
18 D3 Long-term Liabilities Long-term liabilities do not have to have in the near future (i.e. longer than 1 year)e.g. Bank loan, Loan: Mr. Cheung, Debentures…
19 Current assets－Current liabilities＝Working Capital D4 Current liabilitiesCurrent liabilities are to be paid in the near future (i.e. within 1 year).e.g.：Creditors, Accruals, Bank overdraft…Current assets－Current liabilities＝Working Capital
20 Balance Sheet has vertical form and horizontal form. The format of vertical is as follows:
21 Leungs CompanyBalance Sheetas at 31 December, 2008$ $ $Non-current assetsLand and buildingFurnituresFixtures and fittings 500Office equipment 500MachineryMotor vehicles
23 $ $ $CapitalCapital as at 1 January,Add：Net profit3400Less：DrawingsCapital as at 31 December,Long-term LiabilitiesBank loanLoan－Mr. Cheung4800
24 Horizontal form （T form）： Leungs CompanyBalance SheetAs at 31 December, 2006$ $ $ $Fixed assets CapitalLand and buildings Capital as at 1 January,Furniture Add：Net profitFixtures and fittingsOffice equipment Less：DrawingsMachinery Capital as at 31 December,Motor vehicles Long-term LiabilitiesCurrent assets Bank loan 1000Stock Loan-Mr. CheungDebtors Current LiabilitiesBank Creditors 1000Cash Bank overdraft