Profit and loss account and balance sheet

The profit and loss account and balance sheet prepared from the work sheet of XYZ, Company, it will be noticed here that the profit and loss account has been prepared in two different forms; in statement form and in account form. Profit and loss accounts in both the forms give the same information. The account form of the profit and loss account is traditional and is still being used widely; but in recent years many business houses prefer to present the profit and loss account in the statement form.

The work sheet is the source of all of the data reported on the profit and loss account. Similarly, it is the source of all basic data reported on the balance sheet.

In presenting the item of capital in the balance sheet, it is necessary to refer to the capital account in the ledger to determine the balance at the beginning of the period and the amount of any additional investments that may have been made during the period. The amounts of net profit and withdrawals for the period are taken from the balance sheet columns of the work sheet, and the balance of capital at the end of the period is determined arithmetically.

The form for presentation of the capital in the balance sheet can be modified to meet the circumstances of any particular case in the illustration on above work sheet; the amount withdrawn by the owner was less than the net profit. If the withdrawals had exceeded the net profit, the order of the two items could have been reversed and the difference between the two deducted from the beginning capital. Other factors, such as additional investments or a net loss, also necessitate modifications in for, as in the following capital statement

Capital Statement

                                                                 

            Capital, 1^st July, 2008……………………….              35,000.00

            Additional investment during the year………       6,000.00

                        Total…………………………………                                    41,000.00

            Net loss for the year…………………………   8,000.00

            Withdrawals….......................……………….   3,600.00       

            Decrease in capital…………………………..                          11,600.00

            Capital, 30^th June, 2009……………………..                                      29,400.00

 

XYZ, COMPANY

Profit and Loss Account

For Month Ended 30^th June, 2009

Sales Operating Expenses:           Salary expense           Supplies expense           Rent expense           Depreciation expense           Miscellaneous expense                  Total operating expenses Net Profit from operations

$ 708.00 520.00 200.00   50.00 103.00

$ 2,540.00 1,581.00   959.00

Profit and loss account---------statement form

XYZ, COMPANY

Profit and Loss Account

For Month Ended 30^th June, 2009

$ Operating Expenses:           Salary expense………………………..708.00           Supplies expense……………………..520.00           Rent expense…………………………200.00           Depreciation expense………………..  50.00           Miscellaneous expense………………103.00           Net Profit ……………………………959.00                                                               2,540.00

$ Sales…………………   2,540.00                                      2,540.00

Profit and loss account---------account form

XYZ, COMPANY

Profit and Loss Account

For Month Ended 30^th June, 2009

Liabilities                                       $                $ Current Liabilities:    Creditors…………    1,400    Accrued salaries…        708         2,108              Capital XYZ, Capital,   1st July, 2008                6,300   Net profit for   The month            959 Less: withdrawals  500     459        6,759                                                          8,867

Assets                                     $                  $          Current Assets:    Cash…………… 1,702    Debtors…………   585    Supplies………...   230    Prepaid Rent……   400           2,917 Fixed Assets:   Office equipment   6,000   Less accumulated   Depreciation              50          5,950                                                     8,867

Balance Sheet