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.

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