Chapter 4 Trial Balance and Financial Statements 1 List of account - PDF document

BMS Chapter 4 Trial Balance and Financial Statements 1 List of account balances and Trial balance $ Debit / Credit Capital 20,000 Credit Cash 1,760 Debit Bank 13,725 Debit Purchases 8,900 Debit JM 2,000 Credit ERD 3,000 Credit Wages 170 Debit Rent 80 Debit Sales 10,200 Credit Furniture 1,500 Debit SP 250 Debit Fittings 600 Debit Advertising 25 Debit KM 8,090 Debit Drawings 100 Debit HND - FA - Dhanushka Abeysekara 1

BMS Debit Credit Capital - 20,000 Bank 13,725 - Cash 1,760 - Purchases 8,900 - JM - 2,000 ERD - 3,000 Wages 170 - Rent 80 - Sales - 10,200 Furniture 1,500 - SP 250 - Fittings 600 - Advertising 25 - KM 8,090 - Drawings 100 - 35,200 35,200 2 What is Trial Balance? It’s a trial on Balances It checks whether the Total debit = Total credit It does not guarantee that the accuracy of a book keeping system It checks only the arithmetic accuracy (Whether mathematically debits and credits are equal) HND - FA - Dhanushka Abeysekara 2

BMS Example 1 Use the above trial balance and prepare statement of profit or loss and statement of financial position (Assume that the closing inventory is $1,200) Statement of profit or loss Sales 10,200 Cost of sales Opening inventory 0 Purchases 8,900 Closing inventory (1,200) (7,700) Gross profit 2,500 Other Expenses Wages 170 Rent 80 Advertising 25 (275) Net profit 2,225 Statement of financial position Non current assets Furniture 1,500 Fittings 600 2,100 Current assets Inventory 1,200 Receivables 8,340 Bank 13,725 Cash 1,760 25,025 27,125 Capital Capital 20,000 Profit 2,225 22,125 Drawings (100) Current liabilities Payable 5,000 27,125 HND - FA - Dhanushka Abeysekara 3

BMS Readings Study text – Chapter 6 – 6.1 to 6.3 HND - FA - Dhanushka Abeysekara 4