Financial Statements

Financial statements are prepared to ascertain the profit or loss of the business, and to know the financial position of the company.

Trading, profit & Loss accounts ascertain the net profit for an accounting period and balance sheet reflects the position of the business.

All the above has almost a fixed format, just put all the balances of ledger accounts into the format given below with the help of the trial balance. With that, we may derive desired results in the shape of financial equations.

Trading & Profit & Loss Account of M/s ABC LimitedFor the period ending 31-03-2014
To Opening StockXXBy SalesXX
To PurchasesXXBy Closing StockXX
To Freight chargesXXBy Gross Loss c/dXXX
To Direct ExpensesXX  
To Gross Profit c/dXXX  
To SalariesXXBy Gross Profit b/dXXX
To RentXX  
To Office ExpensesXXBy Bank Interest receivedXX
To Bank chargesXXBy DiscountXX
To Bank InterestXXBy Commission IncomeXX
To Electricity ExpensesXXBy Net Loss transfer to Balance sheetXX
To Staff Welfare ExpensesXX  
To Audit FeesXX  
To Repair & RenewalXX  
To CommissionXX  
To Sundry ExpensesXX  
To DepreciationXX  
To Net Profit transfer to Balance sheetXX  
Balance sheet of M/s ABC Limitedas on 31-03-2014
CapitalXXAdd:Net ProfitXXXXFixed AssetsXXXXLess:DescriptionXXXX
Bank BorrowingsXXCurrent Assets – 
Long Term BorrowingXXStockXX
Current Liabilities – DebtorsXX
Advance Form CustomersXXCash In handXX
Sundry creditorsXXXCash at BankXX
Bills Payable Bills receivablesXX
Expenses Payable   

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