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

4. 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

5. 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

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 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

8. 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

9. 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+ …

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 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

12. 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

13. 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

14. 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…

15. 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

16. 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…

17. 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

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 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

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

21. 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

22. $ $ $
Current assets
Stock
Debtors
Bank
Cash
 Less：Current liabilities
Debtors
Bank overdraft
Working capital
4800

23. $ $ $
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

24. 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