Examples of Trading and Profit and Loss Account and Balance Sheet

Learning Objectives:

1. Prepare trading and profit and loss account and balance sheet.

Example 1:

From the following balances extracted from the books of X & Co., prepare a trading and profit and loss account and balance sheet on 31st December, 1991.

	$		$
Stock on 1st January	11,000	Returns outwards	500
Bills receivables	4,500	Trade expenses	200
Purchases	39,000	Office fixtures	1,000
Wages	2,800	Cash in hand	500
Insurance	700	Cash at bank	4,750
Sundry debtors	30,000	Tent and taxes	1,100
Carriage inwards	800	Carriage outwards	1,450
Commission (Dr.)	800	Sales	60,000
Interest on capital	700	Bills payable	3,000
Stationary	450	Creditors	19,650
Returns inwards	1,300	Capital	17,900

The stock on 21st December, 1991 was valued at $25,000.

Solution:

X & Co.
Trading and Profit and Loss Account
For the year ended 31st December, 1991

To Opening stock		11,000	|	By Sales	60,000
To Purchases	39,000		|	Less returns i/w	1,300
Less returns o/w	500		|			58,700
		38,500	|	By Closing stock		25,000
To Carriage inwards		800	|
To Wages		2,800	|
To Gross profit c/d		30,600	|
			|
		83,700	|			83,700
			|
To Stationary		450	|	By Gross profit b/d		30,600
To Rent and rates		1,100	|
To Carriage outwards		1,450	|
To Insurance		700	|
To Trade expenses		200	|
To Commission		800	|
To Interest on capital		700	|
To Net profit transferred to capital a/c		25,200	|
			|
			|
		30,600	|			30,600
			|

X & Co.
Balance Sheet
As at 31st December, 1991

Liabilities		$	|	Assets	$
Creditors		19,650	|	Cash in hand	500
Bills payable		3,000	|	Cash at bank	4,750
Capital	17,900		|	Sundry debtors	30,000
Add Net profit	25,200		|	Bill receivable	4,500
		43,100	|	Stock	25,000
			|	Office equipment	1,000
			|
		65,750	|		65,750
			|

Example 2:

The following trial balance was taken from the books of Habib-ur-Rehman on December 31, 19 ....

Cash	13,000
Sundry debtors	10,000
Bill receivable	8,500
Opening stock	45,000
Building	50,000
Furniture and fittings	10,000
Investment (Temporary)	5,000
Plant and Machinery	15,500
Bills payable		9,000
Sundry creditors		20,000
Habib's capital		78,200
Habib's drawings	1,000
Sales		100,000
Sales discount	400
Purchases	30,000
Freight in	1,000
Purchase discount		500
Sales salary expenses	5,000
Advertising expenses	4,000
Miscellaneous sales expenses	500
Office salary expenses	8,000
Misc. general expenses	1,000
Interest income		1,000
Interest expenses	800
	2,08,700	2,08,700

Closing stock on December 31, 19 ... was $10,000
Required: Prepare income statement/trading and profit and loss account and balance sheet from the above trial balance in report form.

Solution:

Habib-ur-Rehman
Income Statement/Profit and Loss Account
For the year ended December 31, 19.....

Gross sales		100,000
Less: Sales discount		400
Net Sales			99,600
Cost of Goods Sold:
Opening stock		45,000
Purchases	30,000
Add: Freight in	1,000
	31,000
Less purchase discount	500
Net purchases		30,500
Cost of goods available fort sale		75,500
Less closing stock		10,000
Cost of goods sold			65,500
Gross profit			34,100
Operating Expenses:
Selling Expenses:
Sales salary expenses	5,000
Advertising expenses	4,000
Misc. selling expenses	500
		9,500
General Expense:
Office salaries expenses	8,000
Misc. general expenses	1,000
		9,000
Total operating expenses			18,500
Net profit from operations			15,600
Other Expenses and Incomes:
Interest income	1,000
Interest expenses	800
Net increase			200
Net income			15,800

Habib-ur-Rehman
Balance Sheet
As at December 31, 19.....

ASSETS
Current Assets:
Cash	13,000
Sundry debtors	10,000
Bills receivable	8,500
Stock on Dec. 31, 19 ..	10,000
Investment	5,000
Total Current Assets		46,500
Fixed Assets:
Buildings	50,000
Plant and Machinery	15,500
Furniture and fittings	10,000
Total Fixed Assets		75,500
Total Assets		122,000
LIABILITIES:
Current Liabilities:
Sundry creditors	20,000
Bills payable	9,000
Total Current Liabilities		29,000
Fixed Liabilities:
Habib's capital	78,200
Net income for the year	15,800
	94,000
Less: Drawings	1,000
		93,000
Total Liabilities and Capital		122,000