CDA COLLEGE ACC101: BOOK KEEPING 1 Lecture 4 Lecture 4 Lecturer: Kleanthis Zisimos

Chapter Review In Today’s Lecture we Review exercises of last lecture Review exercises of last lecture Construct the form of Profit & Loss account Construct the form of Profit & Loss account Examine income and expenses accounts Examine income and expenses accounts Calculate Net Profit Calculate Net Profit

Profit & Loss Account The Profit & Loss Account is a financial statement which shows all the income and all the expenses of the company and is included in the Trading, Profit & Loss a/c The Profit & Loss Account is a financial statement which shows all the income and all the expenses of the company and is included in the Trading, Profit & Loss a/c The Purpose of this account is to find the Net Profit or Loss. The Purpose of this account is to find the Net Profit or Loss. Net Profit is the difference between Income and Expenses Net Profit is the difference between Income and Expenses

Trading, Profit a Loss Account The Trading, Profit & Loss account is presented in the following vertical form The Trading, Profit & Loss account is presented in the following vertical form Sales X Less Cost of Sales (X) Gross Profit X Add income from other Sources X Total Income X Less Selling and Distribution expenses X Less Administrations Expenses X Less Finance Expenses X (X) Net Profit X

Trading, Profit a Loss Account Gross Profit is the difference between the value of sales and cost of goods sold Gross Profit is the difference between the value of sales and cost of goods sold COGS= Purchases + Carriage inwards+ opening stock –closing stock COGS= Purchases + Carriage inwards+ opening stock –closing stock Gross Profit= Sales - COGS Gross Profit= Sales - COGS Income from other sources may include profits on sale of fixed asset and interest received Income from other sources may include profits on sale of fixed asset and interest received Net Profit=Gross Profit less expenes Net Profit=Gross Profit less expenes

Trading, Profit a Loss Account Selling and Distribution Expenses include Selling and Distribution Expenses include 1. Marketing and advertising cost 2. Bad debts 3. Discounts allowed Administration expenses include Administration expenses include 1. Salaries 2. Rent 3. Insurance 4. Stationary Finance expenses include Finance expenses include 1. Bank interest 2. Bank charges

Discussion Questions 1. Jon Heiss started a business selling ice cream. Prepare a Profit a Loss Account with the following information 1. Jon Heiss started a business selling ice cream. Prepare a Profit a Loss Account with the following information 1. Pays rent € 1000 a year 2. Pays Salary € 200 per month 3. Cash Sales € Credit Sales € Purchases of ice cream € Telephone and Postages € Drawings €400

Discussion Questions More exercises from page 23 More exercises from page 23