Double Entry

1
Double Entry System 3
DR
CR
2
FINANCIAL STATEMENTS
3
An Overview
General Journal
Special Journals
Ledger Accounts
Trial Balance
Adjustments
Prepare Simple Financial Statements
4

• Objectives
• At the end of the lesson, students should be able
  to
• know the purpose of preparing Final Accounts.
• know what is a Trading Profit Loss
• Statement.
• know how to draw up a Trading P L
• statement and a Balance Sheet on the last
• day of the accounting period.

5
Opening Stock Net Purchases Closing Stock
Cost of goods sold
Cost price Profit Selling price
Cost of goods sold Gross Profit
Net Sales
6
How does Trading a/c looks like?
Trading Account for the year ended 31 Dec 2000




Sales Less Returns Inwards
XX (XX)
Opening Stock
XX
XX (XX) XX
(XX) XX XX
Purchases Less Returns
Outwards Less Closing Stock Costs of
Gds Sold Gross Profit
XX
XX
XX
XX
7
An Example
Trading Account for the year ended 31 Dec 2000




Sales Less Returns Inwards
23,000 (1,400)
Opening Stock
1,000
12,000 (2,000) 11,000
(2,300) 8,700
12,900
Purchases Less Returns
Outwards Less Closing Stock Costs of
Gds Sold Gross Profit
21,600
10,000
21,600
21,600
8
Net Profit Gross Profit Operating
Revenues Operating Expenses
9
How does Profit Loss a/c looks like?
Profit Loss Account for the year ended 31 Dec
2000


XX XX
Gross Profit Revenues
XX XX
Expenses Net Profit
XX
XX
10
An Example
Profit Loss Account for the year ended 31 Dec
2000


Gross Profit Commission Revenue Interest Revenue
12,900 7,500 1,000
Rent Expense Insurance Expense Wages Depreciation
Interest Expense Transport Expenses Net Profit

1,000 3,400 7,000 3,000 1,200 2,580
3,220
21,400
21,400
11
Recall.Balance Sheet
Assets Owners Equity
Liabilities
BALANCE SHEET AS AT 1 Jan
2000
Owners Equity Capital
Add Profits Less Drawings
Long Term Liabilities Loan from bank
Current Liabilities Creditors
Other creditors
Fixed Assets Building
Office Equipment Motor Vehicle
Fixtures Current Assets Stock (closing)
Debtors Bank Cash

Same figure


12
A OE L
Example
BALANCE SHEET AS AT 1 Jan 2000

Fixed Assets Motor Vehicle
25000 Fixtures 10050
35050 Current Assets
Stock 4570 Debtors
7400 Cash 630
12600
Owners Equity Capital
38000 Long Term Liabilities Loan
from bank 3000 Current
Liabilities Creditors 6650
47650
47650
13
IN CLOSING