CDA COLLEGECDA COLLEGE

ACC101: BOOK KEEPING 1ACC101: BOOK KEEPING 1

Lecture 4Lecture 4

Lecturer: Kleanthis Zisimos Lecturer: Kleanthis Zisimos

Chapter ReviewChapter Review

In Today’s Lecture weIn Today’s Lecture we

Review exercises of last lectureReview exercises of last lecture Construct the form of Profit & Loss Construct the form of Profit & Loss

accountaccount Examine income and expenses Examine income and expenses

accountsaccounts Calculate Net ProfitCalculate Net Profit

Profit & Loss AccountProfit & Loss Account

The Profit & Loss Account is a financial The Profit & Loss Account is a financial statement which shows all the income statement which shows all the income and all the expenses of the company and all the expenses of the company and is included in the Trading, Profit & and is included in the Trading, Profit & Loss a/cLoss a/c

The Purpose of this account is to find The Purpose of this account is to find the Net Profit or Loss.the Net Profit or Loss.

Net Profit is the difference between Net Profit is the difference between Income and ExpensesIncome and Expenses

Trading, Profit a Loss AccountTrading, Profit a Loss Account The Trading, Profit & Loss account is presented in The Trading, Profit & Loss account is presented in

the following vertical formthe following vertical form

Sales XSales XLess Cost of Sales Less Cost of Sales (X)(X)Gross Profit XGross Profit XAdd income from other Sources Add income from other Sources XXTotal Income XTotal Income XLess Selling and Distribution expenses XLess Selling and Distribution expenses XLess Administrations Expenses XLess Administrations Expenses XLess Finance Expenses Less Finance Expenses XX ( (X)X)Net Profit XNet Profit X

Trading, Profit a Loss AccountTrading, Profit a Loss Account

Gross Profit is the difference between the Gross Profit is the difference between the value of sales and cost of goods soldvalue of sales and cost of goods sold

COGS= Purchases + Carriage inwards+ COGS= Purchases + Carriage inwards+ opening stock –closing stockopening stock –closing stock

Gross Profit= Sales - COGSGross Profit= Sales - COGS Income from other sources may include Income from other sources may include

profits on sale of fixed asset and interest profits on sale of fixed asset and interest receivedreceived

Net Profit=Gross Profit less expenesNet Profit=Gross Profit less expenes

Trading, Profit a Loss AccountTrading, Profit a Loss Account Selling and Distribution Expenses includeSelling and Distribution Expenses include1.1. Marketing and advertising costMarketing and advertising cost2.2. Bad debtsBad debts3.3. Discounts allowedDiscounts allowed Administration expenses includeAdministration expenses include1.1. SalariesSalaries2.2. RentRent3.3. InsuranceInsurance4.4. StationaryStationary Finance expenses includeFinance expenses include1.1. Bank interest Bank interest 2.2. Bank chargesBank charges

Discussion QuestionsDiscussion Questions

1. Jon Heiss started a business selling ice 1. Jon Heiss started a business selling ice cream. Prepare a Profit a Loss Account with the cream. Prepare a Profit a Loss Account with the following informationfollowing information

1.1. Pays rent Pays rent €€ 1000 a year 1000 a year

2.2. Pays Salary Pays Salary €€ 200 per month 200 per month

3.3. Cash Sales Cash Sales €€ 25000 25000

4.4. Credit Sales Credit Sales €€ 600 600

5.5. Purchases of ice cream Purchases of ice cream €€ 17000 17000

6.6. Telephone and Postages Telephone and Postages €€ 700 700

7.7. Drawings Drawings €€400400

Discussion QuestionsDiscussion Questions

More exercises from page 23More exercises from page 23