How to prepare a profit and loss account and balance sheet?

Daner

I'm really struggling with this, could you please help?

Reply 1

Runninground

18

Decide which items go in the balance sheet, which go in the P&L account first. Look at some examples for help.

Reply 2

Daner

OP

I've tried and some items I still don't have a clue where they would go. Do all these items go into the balance sheet as either assets or liabilities?

Reply 3

Runninground

18

I'm not 100% sure, but I would do this:

Sales: PL
Leasehold Factory: Not sure, PL?
Wages and Salaries: PL
Debtors: BS
Purchases: PL
Loan:BS
Insurance: PL
Plant etc: BS
Creditors: BS
Depreciation Expenses: PL?
Capital:BS
Cash: BS
Stock(Opening/Closing): PL/PL
Rates:PL
Drawings:BS
Depreciation Factory:BS
Depreciation Plant:BS
Heat and Light: PL
Cash in Hand: Not sure, Probably PL
Administration: PL

That's what I would do, but a few may be wrong. I'm sure someone on a training scheme with the big 4 will be along soon...

Reply 4

Daner

OP

Thank you, that was very helpful. Would you say deprecation, drawings and creditors would be a liability on the BS?

Reply 5

Runninground

18

Original post by Daner

Thank you, that was very helpful. Would you say deprecation, drawings and creditors would be a liability on the BS?

Drawings goes under the 'Financed By' part. Once you add your opening capital and net profit, you deduct your drawings.

Creditors come under the current liabilities.

Depreciation comes under the fixed assets. The way I was taught was to list the fixed assets, next to that put the value, then next column put the depreciation, then next to that put the net book value (Value-depreciation)

Reply 6

rizzl8

15

for question a6) i couldnt attach answer on email(photo) eeek
photo (8).jpg

Reply 7

rizzl8

15

Original post by Daner

I'm really struggling with this, could you please help?

see above. ill try to add answer for other 1 tonight once ive finished my revision

Reply 8

Daner

OP

Thank you!! That was very helpful!

Reply 9

DJKL

17

Original post by Runninground

I'm not 100% sure, but I would do this:

Sales: PL
Leasehold Factory: Not sure, PL?
Wages and Salaries: PL
Debtors: BS
Purchases: PL
Loan:BS
Insurance: PL
Plant etc: BS
Creditors: BS
Depreciation Expenses: PL?
Capital:BS
Cash: BS
Stock(Opening/Closing): PL/PL
Rates:PL
Drawings:BS
Depreciation Factory:BS
Depreciation Plant:BS
Heat and Light: PL
Cash in Hand: Not sure, Probably PL
Administration: PL

That's what I would do, but a few may be wrong. I'm sure someone on a training scheme with the big 4 will be along soon...

The Factory is a fixed asset in the B/S
Cash in hand is an asset in the B/S

Stock is the tricky one:

Opening stock is an expense in the P/L, Closing stock is a CR to the P/L but also an asset in the B/S

Sales

Opening stock+
Purchases+
Closing Stock _

= Cost of Sales

Gross Profit = Sales-Cost of Sales

The secret is not to consider the heads/accounts by rote, think what they are:

An asset- Enduring value to the business, will possibly use for many years.
Liability-An obligation to pay someone.
Capital- The amount invested in the business by the owner(s) being the figure at the start of the year, plus any capital added, plus any profits made less any capital withdrawn. (usually drawings in a sole trader/partnership)

How to prepare a profit and loss account and balance sheet?

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