Time Tracer Ltd - Publishing

ACCOUNTING INSIGHT

2nd Edition by Edwin Olima FCCA

ISBN 0-9543820-1-3

 

 

 

 

 

 

 

 

 

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Now that the final trial balance  has been prepared, we can check to see if The Company Limited is making a profit or a loss. To do this it is necessary to compile a summary of the income and expenses  of the business during a given period. This summary is called a profit and loss account. 

 

Exercise: Using the final trial balance  in Chapter 12 , enter the relevant figures in the profit and loss  account below. A few have been done for you. Totals have been left in to help you check your entries as you go along.

The Company Limited

Profit and Loss account for the year ending on the 31st December 3000

 

 

3000

 

Reference:

£ís

£ís

Sales                                                                      

 

 

23,000

 

 

 

 

Cost of Goods  Sold

 

 

 

                Opening stock

 

-

 

                Purchases of Goods

 

13,000

 

                Less: Closing stock

 

(                   )

 

 

 

 

(11,500)

 

 

 

 

Gross  Profit

 

 

11,500

 

 

 

 

Other Operating expenses

 

 

 

                Salary

 

1,000

 

                Employer NIC

 

 

 

                Rent

 

 

 

                Phone

 

 

 

                Motor Expenses

 

 

 

                Motor Tax

 

 

 

                Printing, Postage & Stationery

 

 

 

                Insurance

 

 

 

                Bank Charges

 

 

 

                Depreciation of Van

 

 

 

 

 

 

(3,644)

 

 

 

 

Operating Profit

 

 

7,856

 

 

 

 

Interest Received

 

 

 

 

 

 

 

Profit before Tax

 

 

7,866

 

 

 

 

Corporation Tax (say 20% x profit before tax)

Journal 5

 

(1,573)

 

 

 

 

Profit after tax

 

 

6,293

 

 

 

 

Dividends (drawings)

 

 

(                )

 

 

 

 

Profit Retained for the year

 

 

5,393

 

Compare your answer with the one in the answer section at the back of the book. When you have referenced your working papers (See APPENDIX C ), you can enter your references in the reference column above to show where the figures come from.  

 

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