Financial Statement

Balance Sheet: Its show the financial position

of the company. It shows the Asset, liabilities
and capital position of the business at any
point in time.

Income Statement: It is a statement of profit or

loss. It shows the revenue and expense. It
directly relates to the capital, therefore the
profit is added in the capital and loss is
subtracted from the capital at the end of each
period.
Formats of Income statement and Balance
Sheet
Income Statement
For the period ended December 31,
Revenue XXX
Less : Operating Expense
Office Salaries Expense XXX
Insurance Expense XXX
Rent Expense XXX
Advertising Expense XXX
Repairs & Maintenance XXX
Travelling Expense XXX
Utilities Expense XXX
Tot al Operating Expense (XXX)
Net Income / (Net Loss) XXX
 X

Format of Income Statement of Trading Business X

X
X

Sales XXX
Less Sales Return / Sales Discount (XXX)
Net Sales XXX
Less: Cost of Good Sold X
X

Merchandise Inventory (Opening) XXX

X
)

Add: Purchases XXX

X
X
X

Add: Transportation in XXX

(
X

Less: Purchase Discount/ Return (XXX)

X
X

Net Purchase XXX

Goods Available for sale XXX ,
Merchandise Inventory (Closing) (XXX) 1
3

Cost of Goods Sold (XXX) r

e
b
Gross Profit XXX m
e
c
Office Salaries Expense XXX e
D

Insurance Expense XXX d

Rent Expense XXX

t
n
e

Advertising Expense XXX

m
e
t

Repairs & Maintenance XXX

a
t
S

Travelling Expense XXX e

m

Utilities Expense XXX

o
c
n

Total Operating Expenses (XXX)

I

Net Income / (Net Loss) XXX/(XXX)

 Balance Sheet
Assets Liabilities & Equities
Current Assets Current Liabilities
Cash XXX Account Payable
Account Receivable XXX XXX
Prepaid Rent XXX Salaries Payable
Unexpired Insurance XXX XXX
Inventory(Closing) XXX Accrued Expense
XXX
Fixed Assets
Land & Building XXX
Equipment XXX
Furniture XXX Owner’s Equity
Machine XXX Capital (Opening) XXX
Vehicles XXX Add: Net Income XXX
Total Assets XXX Less: Drawing/Loss XXX
Capital (Closing) XXX

Total Equities XXX

 Q1. Below are the account balances as of December 31,
2019 of Mr. R. Gregg owner of a movie theater

Account Payable $ 11,400

Admission Income 34,200
Capital, January 1,2019 16,000
Cash 7,500
Drawing 5,400
Equipment 18,500
Film Rental Expense 6,000
Misc Expense 4,000
Notes Payable 1,000
Rent Expense 10,000
Salaries Expense 7,000
Supplies 4,200

Prepare
i. Income Statement
ii. Balance Sheet
 Mr. R. Gregg
Income Statement
For the Period Ended December 31 ,2019

Admission Income $34,200

Less: Operating Expenses
Film Rental Expense 6,000
Misc Expense 4,000
Rent Expense 10,000
Salaries Expense 7,000
Total Operating Expense 27,000

Net Income 7,200

 Mr. R. Gregg
Balance Sheet
As on December 31, 2019
Assets Liabilities & Equities
Current Assets Account Payable 11,400
Cash 7,500 Notes Payable 1,000
Supplies 4,200

Fixed Assets Owner’s Equity

Equipment 18,500 Capital (Opening) 16,000
Add: Net Income 7,200
Less : Drawing (5,400)
Capital (Closing) 17,800

Total Assets 30,200 Total Equities 30,200

Q2. Listed below are the year end balances of the Sun
Shine Service Company which is owned by Mort Sunshine.
Prepare the year end classified financial statement
Fees $ 37,600
Wages Expense 17,400
Rent Expense 9,300
Drawing 4,000
Supplies Expense 7,200
Misc Expense 750
Cash 11,600
Capital January 1,2019 17,100
Account Receivable 7,400
Supplies 1,300
Prepaid Insurance 1,200
Land 4,200
Equipment 3,700
Account Payable 2,950
Notes Payable 6,150
Mortgage Payable 4,250
 Sun Shine Service Company
Income Statement
For the Period Ended December 31,2019

Fees 37,600
Less: Operating Expense
Wages Expense 17,
400
Rent Expense 9,300
Supplies Expense 7,200
Miscellaneous Expense 750 (34,650)
Total Operating Expense 2,950
Net Income
 Sun Shine Service Company
Balance Sheet
As on December 31, 2019
Assets Liabilities
Current Assets Current Liabilities
Cash 11,600 Account Payable 2,950
Account Receivable 7,400 Notes Payable 6,150
Supplies 1,300 Current Liabilities 9,100
Prepaid Insurance 1,200
Total Current Assets 21,
500 Long Term Liabilities
Fixed Assets Mortgage Payable 4,250
Land 4,200
Equipment 3,700 Owner Equity
Total Fixed Asset 7, Capital (Opening) 17,100
900 Add: Net Income 2,950
Less: Drawing (4,000)
Capital (Closing) 16,050
Total Equities 29,400

Total Assets 29,

400
Q3.The accountant of M/s Noor Consultancy has
extracted following balances from ledger
Debit Balances:
Salaries Expense Rs 25,000 , advertising expense Rs
10,000 , rent expense Rs 40,000 , cash Rs 9,000 ,
prepaid insurance Rs 15,000 , consultation fee
receivable Rs 11,000 , equipment Rs 54,000 ,
furniture Rs 35,000 , drawing Rs 6,000
Credit Balances:
Consultation fee Rs 80,000 , salaries payable Rs 13,
000 , accrued rent Rs 12,000 , Capital Rs 100,000
Required
Prepare following statements for the year ended
December 2019
i. Income Statement ii. Balance Sheet
 M/s Noor Consultancy
Income Statement
For the period ended December 31 ,2019

Consultation Fee 80,000

Less: Operating Expenses
Salaries Expense 25,000
Advertising Expense 10,000
Rent Expense 40,000
Total Operating Expense (75,000)
Net Income 5,000
 M/s Noor Consultancy
Balance Sheet
AS on December 31 2019
Assets Liabilities
Current Assets Current Liabilities
Cash 9,000 Salaries Payable 13,000
Prepaid Insurance 15,000 Accrued Rent 12,000
Consultation Fee Receivable 11, Total Liabilities 25,000
000
Owner’s Equity:
Fixed Assets Capital(Opening) 100,000
Equipment 54,000 Add: Net Income 5,000
Furniture 34,000 Less: Drawing (6,000)
Capital (Closing) 99,000

Total Equities 124,000

Total Assets 124,
000
Q4. Following trial balance pertains to Ahmed Traders for June 30,
2019 Particulars Debit Credit
Mer Inv 50,000
(1/7/2018) 255,000
Purchases 5,000
Transportation – 12,000
In 10,000
Prepaid Rent 30,000
Sales Return 40,000
Account 60,000
Receivable 100,000
Cash 20,000
Warehouse 8,000
Vehicles 3,000
Off Supplies Exp. 2,000
Utilities 15,000
Repair & Maint. 45,000
Printing Expense 4,000
Drawing 16,000
Account Payable 430,000
Purchase Return 115,000
Accrued Salaries 610,000
Sales
Capital
 Ahmed Traders
Income Statement
For the period Ended June 30 ,2019
Sales 430,000
Less: Sales Return (10,000)
Net Sales 420,000
Less: COGS
Merchandise Inv (Opening) 50,000
Add: Purchases 255,
Add: Transportation- In 000
Less : Purchase Return 5,000
Net Purchases (4,000) 256,000
Goods Available for Sale 306,000
Merchandise Inv (Closing) (35,000)
COGS (271,000)
Gross Profit 149,000
Less: Operating Expenses
Office Salaries Exp
Utilities 20,000
Repair & Maint 8,000
Printing Exp 3,000
Net Income 2,000 (33,000)
116,000
 Ahmed Traders
Balance Sheet
As on June 30, 2019
Assets Liabilities
Current Assets Current Liabilities
Cash 40,000 Accounts Payable 45,000
Account Receivable 30, Accrued Salaries 16,000
000
Prepaid Rent 12,000 Total Liabilities 61,000
Merchandise Inv (Closing) 35,
000 Owner’s Equity
Capital (Opening) 115,000
Fixed Assets Add: Net Income 116,000
Warehouse 60,000 Less: Drawings (15,000)
Vehicles 100, Capital (Closing) 216,
000 000

Total Equities 277,

000
Total Assets 277,
000
Q5. The accountant of Bajwa commodities extracted following balances from
ledger.
Debit Balance
Rent Expense Rs 124,000 , advertising expense Rs 30,000 , building
maintenance Rs 26,000 , staff salaries expense Rs80,000 ,cash Rs 15,000 ,
prepaid insurance Rs 35,000 , sales return Rs 20,000 ,account receivable Rs 45,
000 , electronic equipment Rs 305,000 , delivery truck Rs 400,000 , purchase Rs
590,000 , merchandise (opening) Rs 70,000 , freight in Rs 10,000 , drawing Rs 50,
000
Credit Balance
Sales Rs 700,000 , salaries payable Rs 25,000 , Notes Payable Rs 88,000 ,
account payable Rs 135,000 , advance from customer Rs 40,000, Purchase
discount RS 12,000 ,Capital Rs 800,000

Required:
Prepare following statements for the year ended December 31, 2019
(Merchandise on hand at the end of the year was Rs 60,000)

i. Income Statement ii. Balance Sheet

 Bajwa Commodities
Income Statement
For the Period Ended December 31, 2019
Sales 700,000
Less: sales return 20,000
Net Sales 680,000
Less: Cost of Goods sold
Merchandise Inv(opening) 70,000
Add: Purchase 590,000
Add: Freight in 10,000
Less: Purchase Discount (12,000)
Net Purchases 588,000
Goods Available for sale 658,000
Merchandise Inv(Closing) (60,000)
Cost of Goods sold (598,000)
Gross Profit 82,000
Less: Operating Expense
Rent Expense 124,000
Advertising Expense 30,000
Building Maintenance 26,000
Staff Salaries Expense 80,000
Total Operating Loss 260,000
Net Loss (178,000)
 Bajwa Commodities
Balance Sheet
As on December 31, 2019

Assets Liabilities & Equities

Current Assets Current Liabilities
Cash 15,000 Salaries Payable 25,
Prepaid Insurance 35,000 000
Account Receivable 45,000 Notes Payable 88,000
Merchandise Inv ( Closing) 60, Account Payable 135,
000 000
Adv .from customer 40,000
Total Liabilities 288,
Fixed Assets 000
Equipments 305,000
Delivery Trucks 400,000 Owner’s Equity
Capital(Opening) 800,000
Add: Net Loss (178,000)
Total Assets 800,000 Less Drawing (50,000)
Capital (Closing) 572,
000
Total Equities 800,000