profit and loss

valerie861

hey.. can someone explain me few things... i just begin with accounting, and now preparing profit and loss statement from balance sample..
here is what i have;
A/P cr, A/R d, bank d, short term deposit d, delivery vand, drawings d, interest on loan d, loan cr, capital (2010) cr, sales cr, purchases d, advertising d, rent paid d, stationery d, wages -sales assistant d. plus inventories on hand after physical stock count and owner contributed cash on new account
and then i have to do P+L statement
there i have
Income;
and i put under it A/R, Bank, Short term deposit (?)
cost of goods sold:
inventory (after physical stock count, is that mean its closing inventory??????)
purchases
sales(??????????) from beginning i put them under income , now fully confuse....
after that i have other income:
there is van (???) capital )from balance and extra what owner contributed can be together????)
selling expenses- purchases, advertising, wages
admin expenses- drawing, interest on loan, rent, stationwry
financial expenses A/P, Loan (?????? where this loan goin)
I hope for ur help....!!!

davindub

Cant really make out what you are saying entirely but to start a profit and loss in a simple way:

Sales X
Cost of sales (X)

Gross Profit X

Other expenses
Selling and distribution (x)
Admin costs (X)

Net profit X



Cost of sales = Opening inventory + purchases - closing inventory.

closing inventory = physical count at end of year


Just be aware, there are OTHER EXPENSES should also be included in cost of sales under the accounting standards e.g. depreciation on equipment used to bring inventory to saleable condition, storage buildings, etc.


Ignore all items that are not an expense / income e.g. the owner introduces/withdraws cash to the business = balance sheet item affecting bank and capital a/c's.

It sounds like a incomplete records question....

Just bear this in mind for a moment:
If you were working from a trial balance, any item in the trial balance which is not an expense or income does not belong in the profit and loss, it instead goes into the balance sheet, but may give a clue to an expense incurred or income gained that should be included on the P&L, e.g. delivery van = work out depreciation, long term liability = work out interest charged, etc.

If you are doing professional accounting exams, a key thing in some of the questions is to work out sales from solving the cash/bank/accounts receivable balances using T A/cs to get missing figures, its too long to explain here, but thats the aim of the skill, you plug in what you can, and then because the 2 sides must balance, you can use the figure that balances the account to get your missing figure.

exaisle

Just to continue on from davindub...if you're working from a trial balance, all of the figures will either be Income, Expenditure, Asset or Liability. It may help to write the capital letter of whichever type applies in the margin of the trial balance....

Pitfalls to look out for:

Cash introduced by proprietor is a kind of Income but is the exception to the rule in that in sole trader accounts it appears in the Capital Account which is often included as part of the Balance Sheet.

Drawings taken out by the proprietor is a kind of expenditure that is also an exception in that it appears in the Capital account.

The capital account will be:

Opening Balance brought forward XXXX

Add: Profit for year YYYY

Less: Drawings ZZZZ

Closing Balance carried forward ZZZZ