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FINAL ACCOUNTS
All companies or corporations ( businesses owned by shareholders) must provide a set of final accounts consisting on three statements:
Profit and Loss Account Balance Sheet Cash flow statement
FINAL ACCOUNTS
Profit and loss account: This account shows the trading position of a business at the end of a specified accounting period
Balance sheet: This account shows the assets and liabilities of a business at a specific point in time
Cash flow statement: This documents shows the sources of cash inflows of a business and where it has been spent
Trading and profit and loss account Sometimes referred to as an income
statement is a financial statement of a firm’s trading activity over a period of time, usually one year
Trade account represents the top section of the P&L account
Trading and profit and loss account Formula: Gross profit= sales revenue-Cost of
goods sold Cost of sales= Opening stock +
purchases – closing stocks
Trading account for Company Y for year ended 1st April 2011Sales $3600
Cost of Goods sold 1200
Opening stock $1000
Purchases 2000
Closing stocks 1800
Gross profit 2400
Profit and Loss account
The profit and loss account, sometimes referred to as the profit statement. The gross profit, calculated from the Trading Account, is used to deduct all expenses to calculated operating profit
Operating profit= Gross profit -Expenses
Profit and Loss account
Loss and profit account 1
Profit and Loss account
Businesses may also add income from other activities, known as NON OPERATING INCOME.
Those incomes might come from the business colleting payment from renting, interest gained from its deposits from the bank or dividends earned from holding shares in other companies
Profit and Loss account
INTEREST PAYABLE, is a cost as it represents the charge that a business pays to its lenders for loans
INTEREST RECEIVABLE, is a source of revenue from investments and cash deposits at the bank
CORPORATION TAX, is the tax payable on company’s profits
Profit and Loss account
Excel p and l 2 Exercise 3.5.3
Appropriation Account
The third part of the Trading, profit and Loss account is called the Appropriation account
Taxation: This represents the compulsory amount of money imposed by governments o company profits. This amount will be transferred to the balance sheet and shown under current liabilities
Dividends: It shows the share of net profit that is distributed to the owners of a business (shareholders). In the balance sheet is shown under current liabilities
Appropriation Account
Retained profit: This shows how much of the net profit is kept by the business for its own use. This figure is transferred to the capital and reserves section of the firm’s balance sheet
Excel loss and profit 3
Balance Sheet
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