Chapter 4 Trial Balance and Financial Statements 1 List of account - - PDF document

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Chapter 4

Trial Balance and Financial Statements

$ Debit / Credit

Capital 20,000 Credit Cash 1,760 Debit Bank 13,725 Debit Purchases 8,900 Debit JM 2,000 Credit ERD 3,000 Credit Wages 170 Debit Rent 80 Debit Sales 10,200 Credit Furniture 1,500 Debit SP 250 Debit Fittings 600 Debit Advertising 25 Debit KM 8,090 Debit Drawings 100 Debit

1 List of account balances and Trial balance

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Debit Credit Capital

• 20,000

Bank 13,725

• Cash

1,760

• Purchases

8,900

• JM
• 2,000

ERD

• 3,000

Wages 170

• Rent

80

• Sales
• 10,200

Furniture 1,500

• SP

250

• Fittings

600

• Advertising

25

• KM

8,090

• Drawings

100

• 35,200

35,200

It’s a trial on Balances It checks whether the Total debit = Total credit It does not guarantee that the accuracy of a book keeping system It checks only the arithmetic accuracy (Whether mathematically debits and credits are equal)

2 What is Trial Balance?

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Example 1 Use the above trial balance and prepare statement of profit or loss and statement of financial position (Assume that the closing inventory is $1,200)

Sales 10,200 Cost of sales Opening inventory Purchases 8,900 Closing inventory (1,200) (7,700) Gross profit 2,500 Other Expenses Wages 170 Rent 80 Advertising 25 (275)

Statement of profit or loss

Net profit 2,225 Furniture 1,500 Inventory 1,200 Receivables 8,340 Bank 13,725 Cash 1,760 Capital 20,000 Profit 2,225 Payable 5,000 Non current assets Current assets Capital Current liabilities

Statement of financial position

27,125 27,125 Fittings 600 2,100 25,025 Drawings (100) 22,125

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Readings Study text – Chapter 6 – 6.1 to 6.3