debts recovered , , , , , , , Interest received Financial charges Repairs on vehicles used in office Depreciation on vehicles used in office Interest paid Rent received Carriage inwards , , , , , , , Solution Profit and Loss Account for the year ended 31st December, Cr. To Freight outward To Packing charges To Salesmen commission To Promotional expenses To Office telephone expenses To Financial charges To Repairs on vehicles To Depreciation on vehicles To Interest paid , , , , , , , , , By Gross profit b/d By Bad debts recovered By Interest received By Rent received By Net loss transferred to capital account , , , , , , , Note : Carriage inwards will not appear in profit and loss account as it is a direct expense. Student activity Think: From the income statement, is it possible to know how much the business owns or owes? Accountancy - .
Balance sheet Balance sheet is a statement which gives the position of assets and liabilities on a particular date. Assets are the resources owned by the business. Liabilities are the claims against the business. After ascertaining the net profit or net loss of the business enterprise, a business person would like to know the financial position of the business.
For this purpose, balance sheet is prepared which contains amounts of all the assets and liabilities of the business enterprise as on a particular date. The statement so prepared is called ‘balance sheet’ because it gives the balances of ledger accounts which are still there, after the closure of all nominal accounts by transferring to the trading and profit and loss account. Balances of all the personal and real accounts are grouped into assets and liabilities. In the balance sheet, liabilities are shown on the left hand side and assets on the right hand side.
According to J.R. Batliboi, “A Balance Sheet is a statement prepared with a view to measure the exact financial position of a business on a certain fixed date.” . . Need for preparing