Format of Trading Profit & Loss Account
Trading Profit & Loss account for the year ended 31/12/9x
Opening Stock x Stock x
Add purchases x Less return inward x
Less return outward x x Gross loss x
Cost of goods available x
Less closing stock x
Cost of sales x
Gross profit c/d x
X x
Expenses Gross profit b/d x
Wages & salaries x Income from quoted In. x
Rent & Rate x Rent receivable x
Depreciation of assets x Discount received x
Directors remuneration x Other incomes x
Auditors remuneration x x
Advertising x
Hire of plant x
Debenture interest x
Insurance x
Other expenses x
Net profit x
X x
Appropriation Account
Corporate tax x Balance b/f from last year x
General reserve x Net profit b/d x
Revenue reserve x
Dividend interim x
Proposed dividend x
Goodwill written off x
Retained profit c/d x
X x
Balance Sheet Format
Authorized capital N Fixed asset
Cost Dep. NBN
Ordinary share @ N1 each x Land & build X (x) X
10% Preference Share @ N 1 each x Furniture x (x) x
X Machinery x (x) x
Issued share capital Premises x (x) x
Ordinary share @ N 1 each x Goodwill x
10% preference share @ N 1 each x investments
Reserves Quoted x
Share premium x Unquoted x
General reserve x Current assets x
Retained profit x Stock x
Capital redemption reserve x Debtors x
Long-term liabilities Cash x
10% Debenture x Bank x
Current liabilities Bill receivable x
Bill payable x Prepayment x
Income in advance x Accrued income x x
Corporate tax x Preliminary expenses x
Creditors x
Proposed dividend x
Accruals x x
X x
EVALUATION
- List five items that features in the Appropriation Account of a limited liability company.
- Explain the following terms:
- Debentures
- Authorised share capital
- Issued capital
- Proposed dividend
- Revenue reserve
ILLUSTRATION
The following Trial Balance was extracted from the books of Johnson Nigeria Limited as at 31st December,1990.
| Dr | Cr | |
| Issued and fully paid 20,000 shares of ₦1 each | 20,000 | |
| Share premium | 10,000 | |
| General reserve | 8,000 | |
| Profit and loss account | 3,000 | |
| Stock 1/1/90 | 8,000 | |
| Salaries and wages | 5,000 | |
| Discount | 200 | 400 |
| Carriage inwards | 160 | |
| Loans | 24,000 | |
| Interest on loan | 1,000 | |
| Carriage outwards | 560 | |
| Provision for bad depth | 2,000 | |
| Preliminary expenses | 12,000 | |
| Motor vehicle expenses | 1,800 | |
| Director’s salaries | 6,000 | |
| Repairs to premises | 250 | |
| Rates | 1,600 | |
| Premises at cost | 20,000 | |
| Motor vehicle at cost | 23,000 | |
| Plants and machinery cost | 25,000 | |
| Purchases and sales | 45,000 | 91,740 |
| Provisions for depreciation | ||
| Plants and machinery | 2,500 | |
| Debtors & creditors | 12,390 | 8,000 |
| Sundry expenses | 3,500 | |
| Cash in hand | 300 | |
| Cash in bank | 4,000 | |
| Returns | 240 | |
| 170.000 | 170,000 |
Additional information
- Stock at close ₦12,500
- Expense unpaid: motor expenses – ₦ 20
Insurance – ₦ 450
Sundry experiences – ₦400
- Prepaid expenses: Rate – ₦ 320
Sundry expenses – ₦ 250
- Provision for bad debts to be increased to – ₦2,800
- Part of the premises is sublet at ₦2,400 per annum
- Bad debts at 31st December, ₦600
- Monthly salaries and wages bill ₦400
- Loan interest is 5% per annum
- Provide for depreciation on a straight line method: premises 2% ,plant & machinery 25%,motor vehicle 10%
- Write off preliminary expenses
- Transfer to general reserves ₦5,000 and ₦5,000 to revenue reserve.
Prepare :
- Trading, Profit and Loss and Appropriation Account of the year ended 31st December ,1990
- a Balance Sheet as at that date.
Solution:
Johnson Nigeria Limited
Trading,profit and loss for the year ended 31st December ,1990
| ₦ | ₦ | |||
| Opening stock | 8,000 | Sales | 91,740 | |
| Add purchases | 45,000 | Less return inward | (240) | |
| Add carriage inwards | 160 | 91,500 | ||
| 45,160 | ||||
| Less returns outward | (360) | 44,800 | ||
| Costs of goods available | 52,800 | |||
| Less closing stock | (12,500) | |||
| Cost of good sold | 40,300 | |||
| Gross profit c/d | 51,200 | |||
| 91,500 | 91,500 | |||
| Operational expenses | Gross profit b/d | 51,200 | ||
| Discount allowed | 200 | Discount received | 400 | |
| Salaries and wages(400×12) | 4,800 | Rental income | 2,400 | |
| Carriage outwards | 560 | |||
| Interest on loan(0.05×24,000) | 1,200 | |||
| Motor on vehicle exp.(1,800+200) | 2,000 | |||
| Director’s salaries | 6,000 | |||
| Repairs to premises | 250 | |||
| Rates (1,600-320) | 1,280 | |||
| Provision of depreciation | ||||
| Premises (0.02×20,000) | 400 | |||
| Plant and machinery(0.25×25,000) | 6,250 | |||
| Motor vehicle (0.1×23,000) | 2,300 | |||
| Sundry expenses(3,500 + 400)= | ||||
| 3,900 – 250 | 3,650 | |||
| Insurance | 450 | |||
| Bad debts | 600 | |||
| Provision for bad debts | 800 | |||
| Net profit c/d | 23,260 | |||
| 26,260 | 26,260 | |||
| General reserves | 5,000 | Net profit b/d | 23,260 | |
| Revenue reserves | 5,000 | Profit brought forward | 3,000 | |
| Preliminary expenses written off | 12,000 | |||
| Undistributed profit c/d | 4,260 | |||
| 26,260 | 26,260 |
Balance sheet as at 31st December ,1990
| Authorized share capital ₦ |
Fixed assets ₦ |
|||||||||
| 20,000 ordinary shares of ₦1 each | 20,000 | Cost | Dep. | NBC | ||||||
| Issued share capital | Premises | 20.000 | (400) | 19,600 | ||||||
| 20,000 ordinary shares for ₦1 each | 20,000 | Motor vehicle | 23,000 | (2,300) | 20,700 | |||||
| Plant and machinery | 25,000 | (8,750) | 16,250 | |||||||
| Reserves | Current Assets | |||||||||
| General reserves(5000+8,000) | 13,000 | Cash in hand | 300 | |||||||
| Revenue reserves | 5,000 | Debtors (12,390 – 600)= | ||||||||
|
Share premium |
10,000 |
11,790 – 2,800 |
8,990 | |||||||
| Retained profit | 4,260 | Stock | 12,500 | |||||||
| Long term liabilities | Bank | 4,000 | ||||||||
| Loans | 24,000 | Rent receivable | 2,400 | |||||||
| Current liabilities | Prepaid : | Rates | 320 | |||||||
| Creditors | 8,000 | Sundry expense | 250 | |||||||
| Loan interest owing | 200 | Wages and salaries | 200 | |||||||
| Motor expenses owing | 200 | |||||||||
| Insurance accrued | 450 | |||||||||
| Sundry expenses owing | 400 | |||||||||
| 85,510 | 85,510 | |||||||||
Evaluation
- What is fixed assets and give five examples of fixed assets.
- Define intangible assets and mention three examples
Weekend Assignment
- Net purchase in trading account is —————- (a)purchases –return outwards (b) purchases – return inward (c)purchases – carriage inwards (d) purchases – sales
- Net sales in trading account is ————– (a)purchases – sales (b)sales – return inwards (c)sales – return outwards (d) sales + purchases
- Working capital is ————— (a)current assets – current liabilities ( b) current liabilities – current assets (c) total current assets (d) current assets + stock
- Capital owned is ————— (a)current assets – total liabilities (b) total assets – total liabilities (c) total assets + total capital (d) current assets + stock
- Capital employed is ———– (a)total assets – current liabilities (b)total assets – total liabilities (c ) total liabilities + all assets (d) current assets + current liabilities
THEORY
- What is bonus issue?
- Enumerate five features of private limited company.
GENERAL EVALUATION
- List five methods of providing for depreciation of fixed assets.
- State five reasons for making provision for depreciation of fixed assets.
- List eight errors that will affect the agreement of the trial balance.
- Give five reasons for preparing departmental accounts.
- List and explain five classifications of the Ledger.
See also
FINAL ACCOUNTS OF A PARTNERSHIP BUSINESS