MODULE - 3 Financial Statements for Profit and Not for Profit Organisations 14 Notes FINANCIAL STATEMENTS-I You have learnt the meaning of the financial statements and the need to prepare these for the business organisations. You have also learnt the format of these statements and the important items that are recorded in these statements. You would now like to learn how to prepare these statements. You know Trial Balance is the basis of preparation of these statements. Every business organisation prepares the financial statements i.e. Trading and Profit and Loss A/c and the Balance sheet. In this lesson you will learn how to prepare these statements. OBJECTIVES After studying this lesson you will be able to : prepare Trading Account and Profit and Loss Account; explain the Balance Sheet as per format; appreciate the marshalling of Balance Sheet; classify the assets and liabilities; prepare Balance Sheet. 14.1 PREPARATION OF TRADING ACCOUNT AND PROFIT AND LOSS ACCOUNT You have already learnt the meaning and format of Trading Account and Profit and Loss Account. You have also learnt how to make journal entries to transfer relevant ledger balances to Trading Account and Profit and Loss Account. Now you will learn the various steps to be followed in preparing these statements. 27 ACCOUNTANCY MODULE - 3 Financial Statements-I Financial Statements for Profit and Not for Profit Organisations Steps to be followed while preparing Trading Account A. Debit side (i) We write the amount of opening stock (In case of a new firm there will not be any opening stock). (ii) We write the amount of purchases Out of this purchases returns Notes or returns outward is deducted. Purchases may be cash or credit
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