HOW TO PREPARE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET IN LESS THAN TEN MINUTES

Hi friends, here we are going to learn how to do balance sheet and statement of profit and loss in less than ten minutes.

Let us begin the topic with trail balance.
Trail Balance is a statement of debit and credit balances of various ledger accounts at the end of the financial year or any given date.As it is prepared by taking all ledger account balances , both debit and credit sides of the trail balance are always equal.Trail balance is used to prepare final accounts of entity.

                                                TRIAL BALANCE 

PARTICULAR	DEBIT	CREDIT
Capital		80000
Sales		1000000
Petty Cash	10000
Debtor Balance	120000
Salaries	24000
Carriage Inward	4000
Discount Allowed	10000
Building	80000
Prepaid Insurance	2000
Depreciation	4000
Bank Overdraft		10000
Creditor Balance		60000
Outstanding Expenses		10000
Loan A/C		66000
Interest Received		18000
General Reserve		20000
Cash At Bank	40000
Opening Stock	60000
Profit And Loss A/C (Cr) opg.balance		20000
Accrued Interest	4000
Purchase	900000
Investment	20000
Carriage Outward	6000
TOTAL	1284000	1284000

             ADJUSTMENTS:-

         CLOSING STOCK Rs.120000/-

     

 From above trail balance we segregate the ledgers into two categories

•               Balance sheet items
•        Profit and loss A/C items

                 TRIAL BALANCE AFTER ARRANGING THE ITEMS 

PARTICULAR	DEBIT	CREDIT
Balance sheet items
Capital		80000
Petty Cash	10000
Debtor Balance	120000
Building	80000
Prepaid Insurance	2000
Bank Overdraft		10000
Creditor Balance		60000
Outstanding Expenses		10000
Loan A/C		66000
General Reserve		20000
Cash At Bank	40000
Opening Stock	60000
Profit And Loss A/C (Cr) opg.balance		20000
Accrued Interest	4000
Investment	20000
Profit and loss a/c items
Sales		1000000
Salaries	24000
Carriage Inward	4000
Discount Allowed	10000
Interest Received		18000
Purchase	900000
Carriage Outward	6000
Depreciation	4000
TOTAL	1284000	1284000

After rearranging ledgers in trail balance into balance sheet and profit & loss items.

Prepare a mini profit and loss statement to the results it will take less than moment.

                          MINI PROFIT AND LOSS ACCOUNT

PARTICULAR	AMOUNT
Income
Sales and other income	1018000
Less:- Expense
Material consumed
(Opening stock + purchase - Closing stock)	840000
Other Expenses*	48000
(add all expenses from profit & loss a/c items) Excluding purchase
Profit	130000
If difference between income and expense is positive than it will be treated as profit and vice versa *other expense:- Salaries, Carriage Inward, Discount Allowed,Carriage Outward and depreciation

After arriving profit or loss we have to prepare a mini statement of balance sheet to know whether it is tallying.

                         MINI STATEMENT OF BALANCE SHEET

LIABILITIES	AMOUNT	ASSETS	AMOUNT
Capital  80000 Add:- Profit 130000	210000	Closing stock	120000
Other Liabilities*	186000	Other assets*	276000
(add all liabilities from balance sheet items on credit side) excluding capital		(add all assets from balance sheet items on debit side ) excluding opening stock
Total	396000	Total	396000

 * Other Liabilities:- Bank Overdraft, Creditor Balance, Outstanding Expenses, Loan A/C, General   Reserve and Profit And Loss A/C (Cr) opg.balance.

*  Other assets:- Petty Cash, Debtor Balance, Building, Prepaid Insurance, Cash At Bank, Accrued Interest and Investment.

To Download excel format of mini balance sheet and mini profit & loss click here