what are the tow key financial staments of a business
statement of profit or loss and statement of financial position
what four stages rae need to make an SPL and a SFP
record all transactions for the period on T accounts
- balance all T accounts
- list out balances on trial balance sheet
- put each balacne in its fitting statement
what does DEAD CLIC mean and how is it sorted
Debit entries are an increase in
Expenses
Assets
Drawings
Credit entries are for increases in
LIabilites
Income
Capital
whats thr difference between balance C/D and B/D. what does B/D represent
C/D - carried down - for the lower side
B/D - for the larger side, represents the opening balance for the next period
whats different to balancing a asset account to an income acocunt
- You put profit snd loss as the label
- no balnce is borught down for the next period
what an example of crdit and debit balnces?
credit balances is where the totla credits exceed the total debit entries
debit entries is where the total debits exceed total creit entries
what is a trial balance
nominal ledger of all the account balnces from a specific date shown in dedit and credit columns
what can a trial balance show
bookeeping errors such as
entering only one side of transactions
using two different figures for entries
errors during additions
whats is a statement of profit or loss. what does it show. what is this called?
income earned - expenses incurred = profit
- income earned during the period
- expenses incurred
- reguardelss of if money was paid or recieved during the time
- accrural bassis of accounting
what does less cost of goods sold mean in a SPL
taking away the value of the leftover stock/goods at the end of the period
what happens to the leftover stock in the next periods SPL sheet
gets added as opening inventory in the next sheet meaning its added to purchases when calulating
what are returns inwards and returns outwards. how do they work on a SPL
returns inwards - good reutrned by customers - deducted from sales in a SPL
returns outwards - good sent back to suppliers - decuted from purchases in SPL
what do you do in a SFP (for a sole trader)
- Opening captial
- add capital from the current period
- add net profit
- less drawings
- calculate closing capital
