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# References： Chapter 7 to 10 (P )

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References： Chapter 7 to 10 (P. 59-113)
2 Final Accounts References： Chapter 7 to 10 (P )

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).

Examples of Trial Balance：
Leungs Company Trial Balance for the year ended 31 December, 2008 \$ \$ Sales Returns inwards 10 Stock as at 1 January, Purchases Returns outwards Carriages inwards 10 Rental income Commission received 50 Rent Commission Electricity Rates

Stock as at 31 December, 2008 is \$120
\$ \$ Land and building Office Furniture Fittings Office equipment Machinery Motor vehicles Debtors Bank Cash Creditors Bank overdraft Capital Drawings Bank loan Loan－Mr. Cheung Stock as at 31 December, 2008 is \$120

B Trading A/C Function: Calculate the gross profit or gross loss.
Net Sales>Cost of sales Function: Calculate the gross profit or gross loss. Net Sales－Cost of goods sold ＝ Gross profit / Gross loss Net Sales = Sales – Returns inwards Cost of goods sold = Opening stock ＋ (Net Purchases+Carriage inwards) - Closing stock Gross loss: Cost of sales>Net sales Net Purchases = Purchases – Returns outwards

Put the above formulas (算式) into a statement, a Trading A/C is formed.
Trading A/c has vertical form and horizontal form.

for the year ended 31 December, 2008
Examples of vertical form： Leungs Company Trading A/C for the year ended 31 December, 2008 \$ \$ \$ Sales Less：Returns inwards Net Sales Less：Cost of goods sold Stock as at 1 January, Add：Purchases 530 Less：Returns outwards 20 Net purchases 510 Add：Carriage inwards 620 Less：Stock as at 31 December, Gross profit

for the year ended 31 December, 2008
Examples of horizontal form（T form） Leungs Company Trading A/C for the year ended 31 December, 2008 \$ \$ \$ Opening Stock Sales Add：Purchases Less：Returns inwards 10 Less：Returns outwards Net Sales 1000 Net purchases Add：Carriage inwards 620 Less：Closing stock Cost of goods sold Gross profit c/d

C Profit and loss A/C Functions: calculate the net profit / net loss.
Gross profit+Income>Expenses Gross profit＋Other income－Expenses＝Net profit / Net loss Net loss: Expenses>Gross profit+Income Other income= rental income + commission income+… Expenses=rent and rates+commission +electricity+ …

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.

for the year ended 31 December, 2008
Vertical form： Leungs Company Profit and loss for the year ended 31 December, 2008 \$ \$ Gross profit Add： Rental income Commission income 50 650 Less：Expenses Rent Commission 30 Electricity Rates Net Profit

for the year ended 31 December, 2006
Examples of horizontal form (T form)： Leungs Company Profit and loss A/C for the year ended 31 December, 2006 \$ \$ Rent Gross profit b/d 500 Commission 30 Rental income 100 Electricity 150 Commission income 50 Rates 50 Net profit 300

Assets*＝Liabilities**＋Capital***
D Balance Sheet Balance 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

D1 Non-current Assets Non-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…

Non-current assets are listed in the order of “permanency” in the Balance Sheet are as follows:
Land and building Furniture Fixtures and fittings Office equipment Machinery Motor vehicles

D2 Current assets Current 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…

Current assets are listed starting the most difficult to be turned into cash, and the last one is “Cash”: Current assets Stock Debtors Prepayment Bank Cash

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…

Current assets－Current liabilities＝Working Capital
D4 Current liabilities Current 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

Balance Sheet has vertical form and horizontal form.
The format of vertical is as follows:

Leungs Company Balance Sheet as at 31 December, 2008 \$ \$ \$ Non-current assets Land and building Furnitures Fixtures and fittings 500 Office equipment 500 Machinery Motor vehicles

\$ \$ \$ Current assets Stock Debtors Bank Cash  Less：Current liabilities Debtors Bank overdraft Working capital 4800

\$ \$ \$ Capital Capital as at 1 January, Add：Net profit 3400 Less：Drawings Capital as at 31 December, Long-term Liabilities Bank loan Loan－Mr. Cheung 4800

Horizontal form （T form）：
Leungs Company Balance Sheet As at 31 December, 2006 \$ \$ \$ \$ Fixed assets Capital Land and buildings Capital as at 1 January, Furniture Add：Net profit Fixtures and fittings Office equipment Less：Drawings Machinery Capital as at 31 December, Motor vehicles Long-term Liabilities Current assets Bank loan 1000 Stock Loan-Mr. Cheung Debtors Current Liabilities Bank Creditors 1000 Cash Bank overdraft

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