The primary financial statements.

Balance Sheet
Income Statement
Statement of Cash Flows

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. 4. Equity: Equity is the residual interest in the assets of the enterprise after deducting its liabilities. It is also termed as capital. 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.

FINANCIAL STATEMENTS

Manufacturing Account: This is a statement of account prepared by an enterprise engaged in manufacturing activity to find out the cost of goods sold.
1.

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.

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.

Dr

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

Cr

Particulars
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

Amount Rs.

Particulars

Amount Rs.

xxxxx By Sale of scrap Closing Work in Progress Transfer to trading account ( Cost of goods produced)

xxxxx xxxx xxxx

xxxx xxxx xxxx xxxx xxxx xxxx Contd.

Contd.

Particulars
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

Amount Rs.

Particulars

Amount Rs.

xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxxx xxxxx

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 the gross profit or loss during the accounting period.

Dr

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

Amount Rs.

Cr

Particulars

Amount Rs. xxxxx xxxx xxxx xxxx

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 By Sales xxxxx Less: Returns xxx Closing Stock xxxx Abnormal loss of stock xxxx Gross loss (transferred to profit xxxx and Loss Account) xxxx xxxx xxxx xxxx xxxx xxxx xxxx

xxxxx

xxxxx

Note:

A. Closing Stock:
a If it is shown outside a trial balance in the adjustment, i. ii. b side Credit the trading account Show as an asset in the balance sheet

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

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. Adjusted Purchases = Net purchases + Opening Stock Closing Stock D. Cost of Goods sold: Cost of goods sold = Opening Stock + Purchases + Direct Expenses Closing Stock

C. Adjusted purchases:

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 operating expenses.

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.

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

Particulars
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 Amount Rs. xxxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

Particulars
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 )

Amount Rs.

xxxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

Contd..

Contd.
Particulars
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) Amount Rs. xxxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

Particulars

Amount Rs.

xxxxx

xxxxx

BALANCE SHEET

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

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

Balance Sheet of M/s .as on .

Liabilities Capital: Opening Balance Add: Net Profit (Less: Net Loss Less: Drawings Closing Balance Long Liabilities Current Liabilities Income received in advance Sundry Creditors Outstanding Expenses Bills Payable Bank Over Draft xxx xxx xxx) xxxx xx Amt(Rs) Assets Fixed Assets Goodwill Land and Buildings Plant and Machinery Furniture and Fixtures xxxx Investment xxxx Current Assets Closing Stock Accrued Income Prepaid Expenses Sundry Debtors Bills Receivable Cash at Bank Cash in Hand xxxx Amt(Rs) xxxx xxxx xxxx xxxx xxxx

xxxx xxxx xxxx xxxx xxxx xxxxx

xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxxx

Vertical form of Profit and Loss Account Profit and Loss Account of M/s ..for the period ending on .
Particulars 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 Rs. Rs. Rs.

xxxxx xxxxx
xxxx xxxx xxxx xxxx xxxx xxx

xxxxx

xxxxx xxxxx

Particulars

Rs.

Rs.

Rs.

D. Operating Expenses a) Selling Expenses Carriage outwards / sales promotions Expenses / discount allowed / travelling Expenses / 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 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 xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx

xxxxx

xxxxx

C-D
xxxxx xxxxx xxxxx xxxxx

xxxxx xxxxx

xxxxx

xxxxx

xxxxx xxxxx

Vertical form of Balance Sheet

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

A. SOURCES OF FUNDS a) 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

Particulars

Rs.

Rs.

Rs.

ii) Less: Current Liabilities Bank Over Draft Accrued Expenses Bills Payable Trade Creditors Income received in advance

xxxx xxxx xxxx xxxx xxxx

xxxx

xxxx xxxx

b) INVESTMENTS C) FIXED ASSETS Furniture & Fixtures Patents and Trade Marks Plant and Machinery Building Goodwill

xxxx

xxxx xxxx xxxx xxxx xxxx

xxxx xxxx

Schedule of Proprietors funds Particulars

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 Drawings Loss for current accounting period Capital at the end of the Accounting Period (A+B-C) xxxx xxxx xxxx xxxx xxxx xxxx xxxx

Rs.

Rs.
xxxx

xxxx xxxx

xxxx
xxxx

Balance Sheet of a Joint Stock Company VERTICAL FORM

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

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

Particulars
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

Sche dule No.

Figures as at the end of current financial year

Figures as at the end of previous financial year

xxxxxx xxxxxx xxxxxx xxxxxx XXXXX

xxxxxx xxxxxx xxxxxx xxxxxx XXXXX

xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx

xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx

Particulars
(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 :

Sche dule No.

Figures as at the end of current financial year xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx

Figures as at the end of previous financial year xxxxxx xxxxxx xxxxxx xxxxxx xxxxxx

Current liabilities and provisions :

(a) Liabilities (b) Provisions xxxxxx xxxxxx xxxxxx

Net current assets

(4)(a) Miscellaneous expenditure to the extent not written off or adjusted (b) Profit and Loss account

xxxxxx xxxxxx xxxxxx

xxxxxx xxxxxx

xxxxxx xxxxxx

TOTAL :

xxxxxx

xxxxxx

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 and explanatory 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 of decimals 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 VERTICAL FORM

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

Particulars
Sales Less: Sales returns Sales Tax/Excise Duty Net 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)

Sche dule No.

Figures as at the end of current financial year xxxxx xxxxx

Figures as at the end of previous financial year Xxxx xxxxx XXXX

xxxxx xxxxx xxxxx

xxxxx xxxxx XXXX XXXX

Particulars
Less: Operating Expenses Office and Administrative Expenses Selling and Distribution Expenses OPERATING PROFIT Add: Non-Operating Income Less: Non-Operating Expenses (including interest) Profit before interest and tax Less: Interest Profit before tax Less: Tax Profit After Tax Appropriations Transfer to reserves Dividends declared/paid Surplus carried to B/S

Sche dule No.

Figures as at the end of current financial year xxxxx xxxxx xxxxx

Figures as at the end of previous financial year

xxxxx XXXX xxxxx xxxxx

XXXX xxxxx XXXX xxxxx XXXX

xxxxx xxxxx xxxxx

xxxxx XXXX

End of the Module