Final Accounts

Soumya V

Final accounts
Manufacturing concern:
Manufacturing account Trading Account Profit & Loss account Balance sheet

Trading concern:
Trading Account Profit & Loss account Balance sheet

Dr

Trading account for the year ending ..

Particulars Amount xxx xxx xx xxx xxx xxx xxx Particulars By Sales Less Returns By Closing Stock By Gross Loss c/d ( Bal fig) xxx xx

Cr
Amount xxx xxx xxx

To Opening Stock To Purchases Less Returns To Direct Expenses To Gross Profit c/d(Bal Fig)

xxx

Direct expenses
Wages Freight Carriage and cartage Dock and clearing charges Import duty or custom duty Octroi Motive power (Gas, power and fuel) Manufacturing expenses Consumable stores Packing charges Royalty Commission on purchases Excise duty

Gross Profit
Gross Profit = Net sales Cost of goods sold
Cost of goods sold = Opening stock + Net purchases + Direct expenses Closing stock

Dr

Profit & Loss account for the year ending ..

Amount xxx xxx xxx xxx xxx xxx xxx xxx Particulars By Gross Profit b/d By Interest By Commission By discount

Cr
Amount xxx xxx xxx xxx

Particulars To Gross Loss b/d To Office and administration expenses To Selling and distribution expenses To Financial expenses To Repairs and depreciation To Losses and miscellaneous expenses To Net profit (transferred to capital account) (Bal fig)

By Dividend
By Bad debts recovered By Sale of old news papers By profit on sale of fixed assets By Interest on drawings By sundry receipts By Net loss (transferred to capital account)

xxx
xxx xxx xxx xxx xxx

xxx
xxx

Office and administration expenses

Salaries Insurance Rent, rates and taxes Printing and stationery Postage Entertainment expenses Audit fees Legal charges Telephone charges Trade expenses Lighting expenses Sundry general expenses

Selling and distribution expenses

Advertisement Travelling expenses Free samples Commission on sales Delivery van expenses Bad debts Provision for doubtful debts Export duty Carriage outwards Brokerage Godown rent Sales promotion expenses

Financial expenses
Interest on loan Interest on capital Bank charges Discount allowed

Dr

Trading and profit & loss account for the year ending ..
Particulars Amount xxx Particulars By Sales Less Returns xxx xx

Cr

Amount

To Opening Stock

To Purchases Less Returns

To Direct Expenses

xxx xx

xxx xxx
xxx xxx

xxx xxx xxx xxx

By Closing Stock
By Gross Loss c/d ( Bal fig)

To Gross Profit c/d(Bal Fig)

To Gross Loss b/d

To Indirect expenses To Net profit (transferred to capital account)

xxx
xxx xxx xxx

By gross profit b/d

By Income By net loss (transferred to capital account)

xxx
xxx xxx xxx

Balance Sheet (position statement)

Statement of assets and liabilities. On the assets side:
Fixed assets (tangible and intangible) Investments Current assets

On the liabilities side:

Liabilities (Long term and short term) Capital

Grouping and marshalling of assets and liabilities

Grouping means putting together items of a similar nature under a common heading. For e.g., Trade Debtors, Trade creditors etc Marshalling refers to the order in which the various assets and liabilities are shown in the balance sheet
either in the order of liquidity in the order of permanence or

 Order of liquidity:
The most liquid asset is shown first and the least liquid asset is shown last The most urgent payment to be made is shown first and least urgent payment to be made is shown last in case of liabilities

Order of permanence:
The least liquid asset is shown first and the most liquid asset is shown last The least urgent payment to be made is shown first and most urgent payment to be made is shown last in case of liabilities

In the order of liquidity

Balance sheet as on .
Liabilities Current liabilities: Bank overdraft Bills payable xxx xxx Amount Rs Cash in hand Cash at bank Assets Current Assets: xxx xxx Amount Rs

Outstanding expenses
Sundry creditors Income received in advance

xxx
xxx xxx

Bills receivable
Sundry debtors Prepaid expenses

xxx
xxx xxx

Long term liabilities: Loan

Capital

Accrued income xxx

xxx

xxx xxx
xxx

Closing stock
Investments Fixed assets:

Furniture Plant and Machinery

Building Land

xxx xxx
xxx xxx

Goodwill
xxx

xxx
xxx

In the order of permanence

Balance sheet as on .
Liabilities Capital Long term liabilities : Loan xxx xxx xxx Amount Rs xxx Fixed assets: Goodwill Land xxx xxx Assets Amount Rs

Current liabilities:
Income received in advance Sundry creditors

Building
Plant and Machinery Furniture

xxx
xxx xxx

Outstanding expenses

xxx

Investments Current Assets:

Closing stock Accrued income

xxx

Bills payable
Bank Overdraft

xxx
xxx

xxx xxx

Prepaid expenses Sundry debtors

Bills receivable Cash at bank

xxx xxx
xxx xxx

Cash in hand
xxx

xxx
xxx

Capital appears in balance sheet as follows:

Capital:

Opening capital Add: Additional capital Add : interest on capital (adjustment) Add: Net Profit
Less: drawings

Less: Interest on drawings Less: Net Loss (if any)

xxx xxx xxx xxx xxx xxx (adjustment) xxx xxx

xxx

Manufacturing account
Prepared to find out the cost of goods manufactured. Opening and closing stock of finished goods will not be entered in manufacturing account The balancing figure will be the cost of goods manufactured which will be transferred to trading account

Dr
Particulars

Manufacturing account for the period ending..

Amount Particulars Rs xxx xxx xxx By Sale of scrap By Closing Work in progress By Trading account (Cost of production transferred)

Cr
Amount Rs xxx xxx xxx

To Opening Work in progress To Raw materials consumed: Opening stock Add: Purchases

Add Expenses for purchases xxx

Less Returns
Less Closing stock To Factory expenses To Royalty on production

xxx
xxx xxx xxx xxx

xxx

xxx

Dr
Particulars

Trading account for the period ending..

Amount Particulars Rs xxx By Sale of finished goods Less Returns xxx xx

Cr
Amount Rs xxx xxx

To Opening stock of Finished goods To Manufacturing a/c (cost of production transferred) To Purchases of finished goods xxx Less Returns xx To direct expenses on finished goods To Gross Profit c/d

By Closing stock of finished goods xxx xx xxx xxx xxx

xxx

Final accounts with adjustments

Outstanding expenses
Journal Entry: Concerned expense a/c To Outstanding expense

Dr

Given in the adjustment:

Add to corresponding expense in trading or P&L a/c liability side of balance sheet

Given inside trial balance: Only in liability side of balance sheet

Prepaid or unexpired expenses

Journal Entry: Prepaid Expense a/c To Corresponding expense

Dr

Given in the adjustment:

Deduct from corresponding expense in trading or P&L a/c Asset side of balance sheet

Given inside trial balance: Only in asset side of balance sheet

Accrued or outstanding income

Journal Entry: Accrued income a/c Dr To Corresponding income

Given in the adjustment:

Add to corresponding income in trading or P&L a/c asset side of balance sheet

Given inside trial balance: Only in asset side of balance sheet

Income received in advance

Journal Entry: Corresponding income a/c Dr To Income received in advance

Given in the adjustment:

Deduct from corresponding income in trading or P&L a/c Liability side of balance sheet

Given inside trial balance: Only in liability side of balance sheet

Closing stock
Journal Entry: Closing stock a/c To Trading a/c

Dr

Given in the adjustment:

Credit side of Trading a/c Asset side of balance sheet

Given inside trial balance: Only in asset side of balance sheet

Depreciation
Journal Entry: Depreciation a/c To Asset a/c

Dr

Given in the adjustment:

Debit to Profit & Loss a/c Deduct from corresponding asset in balance sheet

Given inside trial balance: Only in P&L a/c

Interest on capital
Journal Entry: Interest on capital a/c To Capital a/c

Dr

Given in the adjustment:

Debit to Profit & Loss a/c Add to capital in the liabilitiies side of balance sheet

Given inside trial balance: Only in P&L a/c

Interest on drawings
Journal Entry: Capital (Drawings) a/c Dr To Interest on drawings a/c

Given in the adjustment:

Credit to Profit & Loss a/c Deduct from capital in the liabilities side of balance sheet

Given inside trial balance: Only in P&L a/c

Goods withdrawn for personal use

Journal Entry: Drawings a/c To Purchases a/c Given in the adjustment:
Deduct from purchases in trading a/c Add to drawings (or deduct from capital) in the liabilities side of balance sheet

Dr

Goods used in the business (free samples, charity, gift etc)

Journal Entry: Advertisement / Charity / Gifts a/c To Purchases a/c
Given in the adjustment:
Deduct from purchases in trading a/c Add to expense in P&L a/c

Dr

Bad debts
Journal Entry: Bad debts a/c Dr To Debtors a/c
Given in the adjustment:
Debit to P & L a/c Deduct from sundry debtors in the balance sheet

Given inside trial balance: Only in P&L a/c

Provision for doubtful debts

Journal Entry: P&L a/c a/c Dr To Provision for doubtful debts a/c
Given in the adjustment:
Debit to P & L a/c Deduct from sundry debtors in the balance sheet

Provision for doubtful debts given inside the trial balance

It is the excess of the provision created during the previous year. Such provision appears in the credit side of trial balance. It can be treated in the P& L a/c in any of the following manner 1. Deduct from current years bad debts and provision in the debit side of P& L a/c or 2. Directly credit it in the credit side of P& L a/c

Bad debts in P & L a/c

Bad debts (given inside trial balance) Add: Further bad debts (given in the adjustment) Add: Provision for bad debts (given in the adjustment) Less: Old provision (given inside the trial balance) xxx xxx xxx xxx xxx

Provision for discount on debtors

Journal Entry: P&L a/c a/c Dr To Provision for discount on debtors a/c
Given in the adjustment:
Debit to P & L a/c Deduct from sundry debtors in the balance sheet

Sundry debtors in balance sheet

Sundry debtors
Less : Bad debts (given in the adjustment)

xxx
xxx

xxx
Less: Provision for bad debts (given in the adjustment) xxx

xxx
Less: Provision for discount on debtors (Adjustment) xxx

xxx

Abnormal loss of stock due to accident

Cost of goods lost has to be credited to trading a/c (or deduct from purchases a/c) The amount of claim admitted by the insurance company has to be shown in the assets side of the balance sheet Actual loss (cost of goods lost insurance claim) has to be debited to P &L a/c