Agrawal Institute

Accounts
Financial Statements
 Financial Statements
• Financial statements (or Final Accounts) are the
statements prepared at the end of accounting period.

• A complete set of financial statements include –

• Trading and Profit & Loss Account
• Balance Sheet
 Objective of Financial Statements
• To asses the financial results i.e. Profit & Loss.

• To asses the financial position i.e. preparing Balance

Sheet.

• To analyze & interpret various ratios from these

statement.
 Trading A/c Cr.
Dr.
Particular ₹ Particular ₹
To Opening Stock **** By Closing Stock ****

To Purchase **** By Sales ****

(-) Purchase Return *** *** (-) Sales Return *** ****
To Direct expenses ***

To Stores consumed ***

To Gross Profit Balance By Gross Loss Balance

***** *****
Store Consumed =
Opening Stores + Purchase of Stores – Closing Stores

COGS =
Opening Stock + Purchases + Direct Exp. – Closing Stock

Adjusted Purchase =
Net Purchase + Opening Stock – Closing Stock

Gross Profit = Net Sales – COGS

Illustration -2,
From the following information, prepare the Trading Account for the year ended 31st
March, 2019 :
Adjusted Purchases ₹ 24,00,000; Freight and Carriage Inwards ₹ 20,000;
Freight and Carriage Outwards ₹15,000; Wages ₹1,70,000;
Fuel and Power ₹30,000; Office Rent ₹ 18,000;
Trade Expenses 10,000; Sales ₹30,00,000;
Closing Stock ₹1,50,000.
Illustration -3,
Ascertain cost of goods sold from the following :
Indirect Exp. ₹ 15,200; Direct Exp. ₹ 18,600; Sales ₹ 1,20,000;
Net Purchases ₹ 72,000; Return Inwards ₹ 12,000; Return Outwards ₹ 8,000;
Closing Inventory ₹ 28,000; Opening Inventory ₹ 16,000
Illustration -4,
Calculate Gross Profit when,
Total Purchase during the year are ₹ 8,00,000
Return Outwards ₹ 20,000; Direct Exp. ₹ 60,000
2/3 of the goods are sold for ₹ 6,10,000
Illustration -5,
Calculate Cost of Goods Sold and Closing Stock from the following information;
Sales ₹ 5,40,000; Sales returns ₹ 16,000; Gross Profit ₹ 1,20,000;
Opening Stock ₹ 20,000; Purchases ₹ 4,00,000; Purchase Returns ₹ 4,000;
Carriage Inward ₹ 15,000.
Illustration -6,
Net sales during the year 2011 is ₹ 2,85,000. Gross Profit is 25% on sales. Find out the Cost
of Goods Sold.
Illustration -7,
Net sales during the year 2015 is ₹ 6,00,000. Gross Profit is 25% on Cost. Find out Gross
Profit and Cost of Goods Sold.
Illustration -8,
In a burglary at the godown of Hansraj Traders on the night of 14th July, 2016, part of the
stock was stolen.
From the following particulars, find out the estimated value of loss of stock by theft:
₹Stock on 1st April, 2016 ₹ 60,000
Purchases from 1st April to 14th July, 2016 ₹ 4,10,000
Sales from 1st April to 14th July, 2016 ₹ 6,00,000
Stock remaining after burglary ₹ 12,000
The normal rate of gross profit for his business is 30% of selling price.
 Profit & Loss Account
Dr. Cr.
Particular ₹ Particular ₹

To Gross Loss **** By Gross Profit ****

To Depreciation By Commission Received

To Bad Debt *** By Discount Received ****

To Rent *** By Bad Debt Recovered

To Indirect Expense *** By Gain on Sale of Asset
etc……. etc…….
To Net Profit Balance By Net Loss Balance

***** *****
 Difference between Trading A/c and P & L A/c

Trading A/c P & L A/c

• It is a part of P & L A/c • It is the main A/c

• Gross profit or Gross loss is • Net profit or Net loss is determined

determined from Trading A/c from P&L A/c

• Balance of Trading A/c is • Balance of P&L A/c is transferred

transferred to P&L A/c to Capital A/c
 Operating Profit
• Operating Profit = Gross Profit – Operating Expenses
or
• Operating Profit = Net Sales – Operating Cost
or
• Operating Profit =
Net Profit + Non Operating Expenses – Non Operating Incomes
• Gross Profit = Net Sales – COGS

• Operating Cost = COGS + Operating Expenses

 Operating Expenses
• Regular type of expenses such as salary, office exp. Depreciation, repair,
etc.
Non Operating Expenses
• Not related for business operation such as donation, charity, loss on sale
of asset, loss by theft or fire, interest paid on loan, etc.

Non Operating Income

• Gain on sale of asset, rent received, interest received, etc.

Gross Profit ****
(-) Operating Expenses ***
Operating Profit ****
(+) Non Operating Income ****
(-) Non Operating Expenses ****
Net Profit ****
 Balance Sheet
• Balance Sheet is a statement of firm’s assets, liabilities
and capital of proprietor at a specific time.

• It is prepared from Real Accounts and Personal

Accounts.
 Balance Sheet
Liabilities ₹ Assets ₹
Capital ***** Fixed Assets :
Add: Interest on capital **** Furniture *****
Add: Net Profit **** Machine, Building *****
Less: Drawing ***** Goodwill, Car, Bike etc.. ***** ******
Less: Income Tax, Life Insurance * * * ** ******
Current Assets :
Non Current Liabilities ***** Cash in Hand *****
Reserves ***** Cash at bank ****
Current Liabilities : Sundry Debtors ****
Bank Over Draft Closing Stock **** ******
Sundry Creditors

Total Total
Q.1 – Prepare Trading A/c , Profit & Loss A/c and Balance Sheet.

Opening Stock ………………. 45,000 Sundry Creditors ………………… 22,100

Purchases ……………………. 1,20,000 Return Outwards ………………… 2,500
Return Inwards……………… 3,200 Sales ………………………………. 3,50,000
Carriage Inwards……………. 2,400 Capital ……………………………. 2,00,000
Carriage Outwards…………. 1,500 Loan from Bank …………………. 24,000
Office Furniture………........... 8,000 Discount Received ……………….. 2,000
Sundre Debtors……………… 68,000 Commission ……………………… 1,600
Dock Charges………………... 5,000
Electric Power………………. 10,000
Fuel, Gas and Water……….. 12,000
Bad Debts…………………… 1,100
Advertisement……………… 25,000
Salary…………………......... 36,000
Cash in Hand………………. 8,100
Cash at Bank……………….. 30,000
Motor Vehicles……………… 58,000
Motor Repairs………………. 3,000
Interest on Bank Loan……… 2,400
Rent and Insurance…………. 24,500
Business Premises…………… 1,06,000
Household expenses…………. 33,000
6,02,200 6,02,200