Accounts_Module 3 Final Accounts

8/22/2019 Accounts_Module 3 Final Accounts

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The primary financialstatements.

Income Statement

Balance Sheet

Statement of Cash Flows


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ELEMENTS OF FINANCIAL STATEMENTS

1. Asset: An Asset is a resource controlled by an enterprise and from which future

economic benefits are expected t flow to the enterprise.

2. Liability: A liability is a present obligation of an enterprise arising from past

events, the settlement of which is expected to result in an outflow from the

enterprise of resources embodying economic benefits.

3. Equity: Equity is the residual interest in the assets of the enterprise afterdeducting its liabilities. It is also termed as capital.

4. Income: Income is the increase in the economic benefits during the accounting

period in the form of inflows or enhancement of assets or decrease in liabilities

that result in the increase of equity other than those relating to the contribution

from equity participants.

5. Expenses: Expenses are decreases in the economic benefits during the

accounting period in the form of outflows of depletion of assets or increase of

liabilities that results in the decrease of equity other than relating to the

distribution to equity participants.


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FINANCIAL STATEMENTS

1. Manufacturing Account: This is a statement of account

prepared by an enterprise engaged in manufacturing activity to find

out the cost of goods sold.

2. Trading and Profit and Loss Account: This is statement of

account prepared to ascertain the profits (gross, net and operating

profits) earned by an organisation during an accounting period.

3. Balance Sheet: This is a statement not an account which shows

as on a particular date, the financial position of an enterprise in terms

of the assets in its possession and the liabilities owed by it.


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MANUFACTURING ACCOUNT

Manufacturing Account is prepared by an enterprise

engaged in manufacturing activities. It is prepared to

ascertain the cost of goods manufactured during an

accounting period. This account is closed by transferring its

balance to the Trading Account.


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Manufacturing Account of M/s .for the period ending on

Particulars AmountRs.


To Opening Work in progress Raw material consumed:

Opening Stock xxxx

Add: Purchases xxxx

Cartage inwards xxxx

Freight inwards xxxx

Less: Closing Stock xxxx

To Wages

Salary to works manager Power, electricity & water

Fuel

Postage & Telephone

xxxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

By Sale of scrap Closing Work in Progress

Transfer to trading account

( Cost of goods produced)

Contd.

xxxxxxxxx

xxxx

Dr Cr


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To Depreciation on:

-Plant & Machinery

-Factory Land & Building

Repairs to :

-Plant & Machinery

-Factory Land & Building Insurance on :

-Plant & Machinery

-Factory Land & Building

Rent and Taxes

General Expenses

Royalty paid

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxxx xxxxx

Contd.


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TRADING ACCOUNT

Trading Account is one of the financial

statements, which shows the result of buying and selling

of goods and or services during an accounting period.

The purpose of drawing a trading account is to know thegross profit or loss during the accounting period.


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Trading Account of M/s .for the period ending on ..

Particulars Amount

Rs.

Particulars Amount

Rs.

To Opening Stock

Purchases xxxxx

Less: Returns xxx

Royalty

Direct Expenses

Rent and Rates

Wages and Salaries

Lighting

Freight inward

Customs and Octroi duty

Carriage inwards

Cartage inwards

Fuel and Power

Gross Profit (transferred to

Profit and loss account)

xxxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

By Sales xxxxx

Less: Returns xxx

Closing Stock

Abnormal loss of stock

Gross loss (transferred to profit

and Loss Account)

xxxxx

xxxx

xxxx

xxxx

xxxxx xxxxx

Dr Cr


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Note:

A. Closing Stock:

a If it is shown outside a trial balance in the adjustment,

i. Credit the trading account

ii. Show as an asset in the balance sheet

b If shown in the trial balance, show only in the balance sheet on the assets

side

B. Royalty:

a. If it depends on the output it is a manufacturing expense and hence debited

in the trading account.

b. If it depends on the sales, debit the profit and loss account.

C. Adjusted purchases:

Adjusted Purchases = Net purchases + Opening StockClosing Stock

D. Cost of Goods sold:

Cost of goods sold = Opening Stock + Purchases + Direct Expenses Closin Stock


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PROFIT AND LOSS ACCOUNT

It is prepared to ascertain the Net Profit or Net Loss incurred by a

business entity during an accounting period.Net Profit: Excess of all revenues over expenses

Net Loss: Excess of all expenses over revenues

Operating Profit: Excess of operating revenues over operatingexpenses.

All the indirect revenue expenses and loss (i.e., other than those

shown in the credit side of the trading account) are debited in the

profit and loss account and all the indirect incomes (i.e., other than

those that are shown on the credit side of the trading account) are

credit side of the trading account.


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Profit and Loss Account of M/s .for the period ending on

Particulars Amount

Rs.

Particulars Amount

Rs.

To Gross Loss b/d

Salaries and Wages

Rent, Rates and Taxes

Fire Insurance Premium

Repairs and Maintenance Depreciation

Audit Fess

Bank charges

Legal charges

Miscellaneous Expenses Discount Allowed

Carriage Allowed

Freight Outward

Commission to salesman

xxxxx

xxxx

xxxx

xxxx

xxxxxxxx

xxxx

xxxx

xxxx

xxxxxxxx

xxxx

xxxx

xxxx

By Gross Profit b/d

Interest Earned

Commission Earned

Rent Earned

Profit on sale of fixed assets Income from investments

Sale of scrap

Miscellaneous Income

Net loss (transferred to capital

Account )

Contd..

xxxxx

xxxx

xxxx

xxxx

xxxxxxxx

xxxx

xxxx

xxxx


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Particulars Amount

Rs.

Particulars Amount

Rs.

To Travelling Expenses

Entertainment Expenses

Sales Promotion Expenses

Advertisement and Publicity

Bad Debts

Packing Expenses

Interest on loan

Loss by theft

Loss by fire

Loss by embezzlement

Net profit (transferred to

capital account)

xxxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxxx xxxxx

Contd.


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B A L A N C E S H E E T

A balance sheet is a financial statement that shows

the balance of assets and liabilities as on a particular date:

* It is only a statement and not an account

* It is prepared as on a particular date but not for a

particular period

* It is a summary of balances in accounts which not have

been closed

* It shows the nature and amount of assets and liabilities


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The format of a balance sheet (Horizontal Form) is as follows:

Balance Sheet of M/s .as on .

Liabilities Amt(Rs) Assets Amt(Rs)

Capital:Opening Balance xxx

Add: Net Profit xxx

(Less: Net Loss xxx)

xxxx

Less: Drawings xx

Closing Balance

Long Liabilities

Current Liabilities

Income received in advanceSundry Creditors

Outstanding Expenses

Bills Payable

Bank Over Draft

xxxx

xxxx

xxxxxxxx

xxxx

xxxx

xxxx

Fixed AssetsGoodwill

Land and Buildings

Plant and Machinery

Furniture and Fixtures

Investment

Current Assets

Closing Stock

Accrued Income

Prepaid ExpensesSundry Debtors

Bills Receivable

Cash at Bank

Cash in Hand

xxxxxxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxxxxxx

xxxx

xxxx

xxxx

xxxxx xxxxx


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Vertical form of Profit and Loss Account

Profit and Loss Account of M/s ..for the period ending on .

Particulars Rs. Rs. Rs.

A. Net Sales

Sales (gross)

Less: Returns

B. Cost of Goods Sold

Opening Stock

Add: Purchases

Less: Returns

Add: Direct Expenses

Carriage / cartage / freight / wages /

Insurance

Cost of goods available for sales

Less: Closing Stock

C. GROSS PROFIT

xxxx

xxxx

xxxx

xxxx

xxxxx

xxxxx xxxxx

xxxxx

xxxx

xxx

xxxxx


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D. Operating Expenses

a) Selling Expenses

Carriage outwards / sales promotions

Expenses / discount allowed / travellingExpenses / commission allowed /

Entertainment expenses

b) Office & Administrative Expenses

Sales expenses / Rent, Rates & taxes /

Repairs / insurance / printing & stationery /

Water & electricity / Postage & telegrams /

staff welfare expenses /conveyance expenses/

miscellaneous expenses / depreciation

E. NET OPERATING PROFIT / LOSS C-D

F. Net Operating Result

a) Interest earned / commission earned /

discount earned / miscellaneous incomes

b) Non-Operating expenses and losses

ex: interest allowed

Loss on sale of fixed assets

G. NET PROFIT

xxxxx

xxxxxxxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxxxxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx


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Vertical form of Balance Sheet

Balance Sheet of M/s .. as on ..


A. SOURCES OF FUNDSa) Proprietors funds

b) Long term debts

B. APPLICATION OF FUNDS

a) NET WORKING CAPITAL

i) Current Assets

*Cash in hand

*Cash at Bank

*Bills Receivable

*Accrued Income*Debtors

*Stock

*Prepaid Expenses

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx xxxx

xxxx

xxxx

xxxx

P ti l R R R


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ii) Less: Current Liabilities

Bank Over Draft

Accrued Expenses

Bills Payable

Trade Creditors

Income received in advance

b) INVESTMENTS

C) FIXED ASSETS

Furniture & Fixtures

Patents and Trade Marks

Plant and Machinery

Building

Goodwill

xxxx

xxxx

xxxxxxxx

xxxx xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx


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Schedule ofProprietors funds

Particulars Rs. Rs.

A. Capital in the beginning

B. Add: Additional capital introduced

Interest on Capital

Salary to partner

Profit for the current accounting period

C. Less: Drawings

Interest on DrawingsLoss for current accounting period

Capital at the end of the Accounting Period (A+B-C)

xxxx

xxxx

xxxx

xxxx

xxxx

xxxxxxxx

xxxx

xxxx

xxxx

xxxx

xxxx

Balance Sheet of a Joint Stock Company


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Balance Sheet of a Joint Stock Company

VERTICAL FORM

Name of the Company ..........................

Balance Sheet as at ..........................

ParticularsSchedule

No.

Figures as at theend of current

financial year

Figures as at theend of previous

financial year

I. SOURCES OF FUNDS:

(1)Shareholder's funds

(a) Capital

(b) Reserves and Surplus(2)Loan funds

(a) Secured loans

(b) Unsecured loans

TOTAL :

II. APPLICATIONS OF FUNDS:

(1)Fixed assets

(a) Gross block

(b) Less depreciation

(c) Net block

(d) Capital work-in-progress

(2)Investments

xxxxxx

xxxxxx

xxxxxx

xxxxxx

XXXXX

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

XXXXX

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

Sche Figures as at the Figures as at the


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Particulars

Sche

dule

No.

Figures as at the

end of current

financial year

Figures as at the

end of previous

financial year

(3)Current assets, loans, and advances :

(a) Inventories

(b) Sundry debtors(c) Cash and bank balances

(d) Other current assets

(e) Loans and advances

Less :

Current liabilities and provisions :

(a) Liabilities

(b) Provisions

Net current assets

(4)(a) Miscellaneous expenditure to the extent not

written off or adjusted

(b) Profit and Loss account

TOTAL :

xxxxxx

xxxxxxxxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxxxxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxxxxx


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Notes -

1. Details under each of the above items shall be given in separate

Schedules. The Schedules shall incorporate all the information

required to be given under A - Horizontal Form read with notes

containing general instructions for preparation of balance sheet.

2. The Schedules, referred to above, accounting policies andexplanatory notes that may be attached shall form an integral part of

the balance-sheet.

3. The figures in the balance-sheet may be rounded off to the nearest

'000' or '00' as may be convenient or may be expressed in terms ofdecimals of thousands.

4. A foot-note to the balance sheet may be added to show separately

contingent liabilities.

Profit and Loss Account of a Joint Stock Company


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Profit and Loss Account of a Joint Stock Company

VERTICAL FORM

Name of the Company ..................Income Statement for the year ending ...................

Particulars

Sche

duleNo.

Figures as at

the end ofcurrent

financial year

Figures as at

the end ofprevious

financial year

Sales

Less: Sales returns

Sales Tax/Excise DutyNet Sales (1)

Cost of goods sold:

Materials consumed

Direct labour

Manufacturing Expenses

Add/Less: Adjustment for change in stock

Cost of goods sold (2)

GROSS PROFIT (1) - (2)

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

Xxxx

xxxxxXXXX

xxxxx

xxxxx

XXXX

XXXX


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Particulars

Sche

dule

No.

Figures as at

the end of

current

financial year

Figures as at

the end of

previous

financial year

Less:

Operating ExpensesOffice and Administrative Expenses

Selling and Distribution Expenses

OPERATING PROFIT

Add: Non-Operating Income

Less: Non-Operating Expenses (includinginterest)

Profit before interest and tax

Less: Interest

Profit before tax

Less: TaxProfit After Tax

Appropriations Transfer to reserves

Dividends declared/paid

Surplus carried to B/S

xxxxxxxxxx

xxxxx

xxxxx

xxxxx

xxxxx

xxxxx

XXXX

xxxxx

xxxxx

XXXX

xxxxx

XXXX

xxxxxXXXX

xxxxx

XXXX


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End of the Module

Documents

Accounts_Module 3 Final Accounts