Financial statements of sole Proprietorship

 

Calculation of Gross Profit : Gross Profit = Net Sales - Cost of Goods Sold  Cost of Goods Sold = Net Sales - Gross Profit
OR
= Opening Stock + Purchases + Direct Expenses - Closing Stock.
Calculation of Operating Profit : Operating profit = Net sales – Operating cost.
Operating Cost = Cost of Goods Sold+office and admn. Expenses+selling
and distribution exp.
OR
Operating Profit = Gross Profit – (Office Admn. Expenses+selling and
distribution exp.)
Net Profit = Operating Profit +Non–operating profit -non-operating expenses.
Operating expense : the expenses which are related to the main or normal
activites of the business e.g. office and admn. expenses, selling and distribution expenses.
Operating profit also called EBIT (earning before interest and taxes)
Format of a Trading and Profit and Loss Account
Trading and Profit and Loss Account

(for the year ending.............)

transferred to capital A/c)

BALANCE SHEET

In Trading and Profit and Loss account all nominal A/cs balances are transferred and balances of all the personal and real accounts grouped as assets and liabilities. Liabilities are shown on the left hand side of the balance sheet and assets on the right hand side of the balance sheet.

Main purpose of preparing balance sheet is to ascertain the financial position of the business at a particular point of time.

Grouping and marshalling of assets and liabilities :

Grouping : means putting various assets and liabilities having the same nature under some common heading. e.g. the amount receivable from various customers will be shown under heading ‘Sundry Debtors’. Similarly, under heading ‘Current Assets’ the balance of cash, bank, debtor, stock etc. will be shown.

Marshalling : is the arrangement of various assets and liabilities in a particular order like (a) in the order of liquidity (b) in the order of permanence-exactly the reverse of the order of liquidity.

(a) in the order of liquidity-More Liquid Assets→ less liquid → permanent
Assets
First item to Last item of assets →
Short term liabilities →medium term liabilities→ Long term liabilities
(b) in order of permanence- More permanence assets→ less permanence
→ liquid assets
Long term liabilities→ medium term liabilities→ short term liabilities

Balance Sheet
As on .....................

Liabilities	Amount	Assets	Amount
Sundry Creditors Bills Payable Bank Loan Outstanding expense Income received in advance	............... ............... ............... ...............   ...............	Cash in hand Cash at bank Bills Receivables Sundry debtors   Advance payments	............... ............... ............... ...............   ...............

Loan on mortgages Reserves and surplus Capital	............... ............... ...............	Stock Investment Furniture and fixture Plant and machinery Land and building Trade mark Copyrights Patents Goodwill	............... ............... ............... ............... ............... ............... ............... ............... ...............

 

CBSE Accountancy Class XI ( By Mr. Aniruddh Maheshwari ) 
Email Id : [email protected]