Worksheets › Class 11 › Financial Statements – I › Cheat sheet
Class 11 Financial Statements – I: cheat sheet
CBSE Accountancy. Capital and revenue items, the trading and profit and loss account, gross, net and operating profit, the balance sheet and the opening entry.
Key ideas
- Capital expenditure gives benefit for more than a year (a van, installing a machine); revenue expenditure is used up within the year (wages, repairs, rent).
- The trading account takes sales less returns, the stocks, purchases less returns and the direct expenses (wages, carriage inwards, freight, factory rent) and gives the gross profit.
- The profit and loss account takes the gross profit, the indirect expenses (office salaries, advertisement, carriage outwards, bad debts, interest on a loan) and other incomes, and gives the net profit.
- Operating profit leaves out non-operating items such as interest paid on a loan and interest received.
- The balance sheet shows the assets on one side and capital and liabilities on the other, with equal totals.
- The opening entry debits every asset and credits every liability, with capital as the balancing figure.
Remember
| Cost of goods sold | opening stock + purchases − purchases returns + direct expenses − closing stock |
| Gross profit | (sales − sales returns) − cost of goods sold |
| Net profit | gross profit + other incomes − indirect expenses |
| Operating profit | net profit + non-operating expenses − non-operating incomes |
| Closing capital | opening capital + net profit − drawings |
| Opening capital | closing capital − net profit + drawings |
| Capital in the opening entry | total assets − total liabilities |
Watch out
- Putting carriage outwards in the trading account, or carriage inwards in the profit and loss account.
- Taking purchases returns off sales instead of off purchases.
- Leaving drawings out of the closing capital.
Worked example
Prepare the trading and profit and loss account for the year ending 31 March from: opening stock ₹32,000, purchases ₹2,77,000, purchases returns ₹1,000, wages ₹5,500, carriage inwards ₹5,000, sales ₹4,18,000, sales returns ₹6,000, closing stock ₹53,000; salaries ₹29,000, rent ₹19,000, advertisement ₹7,000, carriage outwards ₹1,500, interest on loan ₹4,500, commission received ₹8,000, interest received ₹5,000. Show (a) the cost of goods sold (b) the gross profit (c) the net profit (d) the operating profit.
Working: Net sales ₹4,12,000 − cost of goods sold (₹32,000 + ₹2,76,000 + ₹5,500 + ₹5,000 − ₹53,000 = ₹2,65,500) = ₹1,46,500; net profit = ₹1,46,500 + ₹8,000 + ₹5,000 − ₹29,000 − ₹19,000 − ₹7,000 − ₹1,500 − ₹4,500; operating = ₹98,500 + ₹4,500 − ₹5,000
Answer: (a) ₹2,65,500; (b) ₹1,46,500; (c) ₹98,500; (d) ₹98,000
Practise Financial Statements – I
Revise with this page, then practise: every Financial Statements – I sheet in the app is new, with an answer key and working.
Coming soon for Android and iPhone.