FINAL ACCOUNTS

Ajit Sir

Basic Rules
Everything in trial balance ONLY ONE EFFECT Adjustments 2 equal and opposite effects What are Adjustments
The transactions which are yet to be accounted due to inevitability (Depn, Outstanding, etc) or error Closing stock, counted physically and recorded

Trial Balance to Trading Account

Is it expense related directly to manufacturing or purchase of Raw Materials?... Dr of Trading Account. Anything related to inflow of goods by way of purchase or mfg Is it any way by which goods are moving out? Trading A/C Cr.

Trial Balance to Profit & Loss A/C

Dr of P & L A/C
Expenses related to business but not directly affecting inflow. Expenses related to outflow Admin, selling and distribution and financial expenses Depreciation

Other incomes on Cr of P & L

Trial Balance to Balance Sheet

Does an Account have continuing impact in the period to come?, then B/S Would the continuing impact be, generation of inflow?... Then Asset If the account would cause outflow in future Liability

Trading Account for the year ended 31st March, 2006 Dr. Particu lar Amt Rs. To Opening Stock To Purchases Less :Purchases Returns To Wages & Salaries To Carriage Inward To Gross Profit transferred to Profit & Loss A/c **** *** **** Particul ar Amt Rs. Cr.

***

By Sales Cash Credit **** **** ****

**** **** ***

Less:Sales Return By Closing Stock

***

**** ****

***** ****

Dr. Particular

Profit &Loss Account for the year ended 31st March, 2006 Amt Rs. Particular

Cr. Amt Rs

To Sundry Expenses To Rent, Rates & Taxes To Carriage Outward ToTravelling Expenses To Bad Debts To Insurance Premium To Postage To Motor Car Expenses To Net Profit

*** *** *** *** *** *** *** *** **** ******

By Gross Profit From Transferred From Trading A/c By Commission

****

***

******

Liabilities Particular

Balance Sheet as at 31st March, 2006 Amt Rs. Particular

Assets Amt Rs.

Capital Add: Net Profit

**** **** ****

Cash Sundry Debtors Bills Payable **** Closing Stock Furniture

*** **** **** **** **** **** **** *****

Less: Drawings

****

Sundry Creditors Bills Payable

**** **** *****

Motor Car Buildings

Adjustments
Closing Stock
Dr to Asset side of Balance Sheet Cr to trading account

Depreciation
Less from Assets in Balance Sheet Cr Effect P & L Dr. Side

Expenses prepaid & Outstanding

Prepaid
Asset Side of Balance sheet Dr Effect Less from Exp Fig in P & L Cr Effect

Outstanding
Liability in balance sheet Cr Effect Add to Exp Fig in P & L Dr Effect

Incomes Received in Advance and Receivable

Yet Receivable
Asset Side of Balance sheet Dr Effect Add to Income Fig in P & L Cr Effect

Received in Advance
Liability in balance sheet Cr Effect Less from Income Fig in P & L Dr Effect

Trading Account T R I A L TRIAL BALANC E B A L A N C e Inflow and outflow of goods Main business Activity

Closing Stock

Gross Profit

Balance Sheet All the balances which have impact in the subsequent period Net Pro fit

Profit & Loss A/C All Associated, Operational Expenses

Structure of Profit and Loss Account :Profit and loss account for the years ending
Items 1. Income Sales Dividend Interest Other income Total 2. Expenditure (a) Cost of goods sold Opening stock Add : Purchases during the year . Less : Closing stock (b) Manufature expenses ( c) Selling expenses (d) Salaries, wages & Employee benefits

..

Schedule No. Current years Previous years

(e) Managerial remunaration (f) Depreciation & amortization (g) Auditors remuneration (h) Provision for doubtful debts/ contingent liabilities (i) Interest expense (j) Other expenses 3. Profit/loss before tax (1-2) 4. Provision for tax 5. Profit / loss after tax 6. Proposed dividend (a) Preference dividend (b) equity dividend 7. Transfer to reserves 8. Surplus

Structure of Balance Sheet :Name of the company Balance sheet as on

Items 1. Sources of Funds (i) Shareholder's funds : (a) Share capital (b) Reseerve and surplus (ii) Loan funds : (a) Secured loans (b) Unsecured loan Total 2. Application of Funds (i) Fixed assets (a) Gross block Less : accumulated depreciation net block (b) capital work in progress (ii) Investment (iii) Current assets,loans and advances : (a) Inventories (b) Sundry debtors (c ) Cash and bank balance (d) Other current assets (e) Loan and advances less : Current liabilities & Provision (a) liabilities (b) Provision Net current assets (iv) Fictitous assets (a) Miscellaneous expenditures (to the extent not written off or adjusted) (b) Profit and loss account Total Schedule No.

..
Current years Previous years

Schedule No. Schedule 1 Share capital Autorized capital Issued and subscribed capital Schedule 2 Reserve and surplus Revaluation reserve Capital redemption reserve capital reserve Debenture redumption reserve Decurities premium General reserve As per last balance sheet Add: Transferred during the current years Profit and loss account (surplus) Schedule 3 Secured loans Schedule 4 Unsecured loan

Schedule 5 Fixed assets- Tangible (a) Opening balance (gross block) Add : Additions Less : Assets disposed Fixed assets- Intangible 3 Closing balance (gross block) (b) Opening balance (accumulated depreciation) Add: depreciation for the years Less : accumulated depreciation of assets disposed closing balance (accumulted depreciation) Net block (a-b) Fixed assets - intangible Goodwill Patents Copyrights Trademark and logo

Schedule 6 Investment (a) Long-term investment (b) Current investment (c ) Investment in subsidaries & Group Companies Schedule 7 Current assets, loans and advance : (a) Inventories (b) Sundry debtors (c ) Cash and Bank balance (d) Other current assets Loan and advanced

Schedule 8 Current liabilities and provision (a) Current liabilities Acceptances Sundry Creditors Other current liabilities (b) Provision Provision for tax Proposed dividend Other provision Schedule 9 Miscellaneous expenditures (to the extent not written off)

Schedule 10 Contingent liabilities Schedule 11 Sales & service Schedule 12 Other income 3 Schedule 13 Manufacturing and operating expenses Schedule 14 staff expenses Schedule 15 Administation, selling and other expenses Schedule 16 Interest expenses Schedule 17 Significant accounting policies

xample 20 :The following is the profit and loss account and balance sheet of Sevadaar International Ltd. Redraft these in vertical form. Profit and loss account for the year ending March 31,2009
Particulars To opening Stock Finished goods Raw material To Purchase of raw material To Direct Wages To Manufacturing Expenses To Administrative expenses To Depricitaion To Preliminery expenses written off To selling and distribution expenses To loss on sales of Plant To interst on Debenture To net Profit To provision for tax To General reserve To preference Dividend To Final equity Dividend To Balance c/f Rs Particulars Rs 20,00,000 10,000 5000 40,000

50,000 By Sales 40,000 By Closing stock 2,00,000 Finished goods 1,10,000 Raw material 90,000 By Profit on sales of assets 10,000 80,000 5,000 140,000 5,000 40,000 12,85,000 20,,55,000 3,50,000 4,80,000 1,00,000 1,40,000 3,30,000 14,00,000 By Balance b/f By net Proft for the years

20,55,000 1,15,000 12,85,000

14,00,000

Particluar Sales Less : Cost of goods Sold (COGS) Raw Material Consumed Opening stock of R.M. (+) Purchase of R.M. (-) Closing stock of R.M. Raw material consumed Direct wages Manufacturing expenses Add : Opening stock of finished goods Lee : Closing stock of finished goods cost of Goods Sold Gross profit Less : Opening Expenses Administrative expenses Selling & Distribution expenses Cash operating profit (EBDAIT) Less : Depreciation & A,ortization Depreciation Preliminary expenses Operating Profit

Details

Amount re. 20,00,000

40,000 2,00,000 5,000 2,35,000 1,10,000 90,000 4,35,000 50,000 10,000 4,75,000

(4,75,000) 15,25,000

10,000 1,40,000

(1,50,000) 13,75,000

80,000 5,000

85,000 12,90,000

Particluar Operating Profit Add : Non-Operating Income (profit on sale of share ) Less: Non-operating expenses/Losses (loss on sale of plant) Earning before interest and Tax (EBIT) Less : interest Earning before Tax (EBT) Less : Tax Earning after tax (EAT) Surplus of provision years Ass: Profit for the year Less : (1) Transfer to General Reserve (2) Preference Divided (3) Final Equity Dividend

Details 40,000 5,000

Amount re. 12,90,000

35,000 13,25,000 40,000 12,85,000 3,50,000 9,35,000 1,15,000 9,35,000 (4,80,000) (1,00,000) (1,40,000)

Surplus Carried Forward

3,30,000

Laibilities

Amount (re. in crore)

Assets

Amount (re. in crore) 22,00,000 5,80,000 4,60,000 2,70,000 10,000 5,000 1,85,000 50,000 20,000 1,30,000 1,00,000 40,10,000

Equity Share Capital (Face Value re.10) 12.5% Preference Share Capital General reserve Securities Premium P & L a/c 10% Debenture Sundry creditors Outstanding expenses Tax Payable Dividend payable

10,00,000 Plant (net) 8,00,000 Building (Net) 6,80,000 Land 30,000 Investment 3,30,000 Stock 4,00,000 Finished goods 2,50,000 Raw material 30,000 Sundry debtors 3,50,000 Bank balance 1,40,000 Marketable securities Pre-paid expenses Preliminary expenses 40,10,000

Items 1. Source of Funds (i) Shareholder's funds : Share capital Reserve & Surplus (ii) Loan funds : Secured loans Total 2. Application of Funds (i) Fixed assets : Net Block (ii) Investment (iii) Current assets, loan and advances Current liabilities & provision Net current assetas (iv) Fictitious assets Total 18,00,000 10,40,000 4,00,000

Amount Re.

32,40,000

32,40,000 2,70,000 4,00,000 (7,70,000) (3,70,000) 1,00,000 32,40,000

By, CA Ajit sir

Assistant Professor, PTVAs Institute of Management