Revision- Financial Statements

Y11 Accounting

Income Statement for a Service Firm Income Statement for a Trading Firm A Balance Sheet A Cash Budget Perform Balance Day Adjustments

What you need to be able to do:

Being able to classify accounts Knowing the order and layout of each

statement- memorise these layouts Appropriate headings MUST be used Writing a PPE note- know the headings and

labels Knowing how to write the title for each

statement

This includes:

Any item on the left hand side of a Trial Balance is either:◦ An expense (Distribution/Administration/Finance)◦ Cost of Goods Sold (Opening inventory, Purchases, Freight in,

Customs duty)◦ An asset (Current, PPE, Intangible or Investment)◦ Drawings◦ OR a negative account of anything from the other side e.g. Sales

Returns

Any item on the right hand side of a Trial Balance is either:◦ Income (including other)◦ Liability (Current and Non-current)◦ Capital◦ OR a negative account of anything from the other side e.g.

Purchase Returns

Key Tips

The inventory figure for the Current Asset section and Closing Capital is always given in the notes and starts with 31st

Always classify the items in the trial balance and put a line through them when you have put them into the statements to ensure you have dealt with all items

If you cannot do a particular adjustment move on to the others. Always put an account and a figure if you have done the adjustment or not under a heading

Key Tips

When classifying expenses ask the following questions:◦ If the expense can be directly linked to selling

the product it a distribution/selling expense e.g. Advertising

◦ If it is a necessary expense, but cannot be linked to selling the product it is an Administration Expense e.g. Accountancy fees

◦ If it is an Interest Expense it always goes under Finance Costs- The ONLY thing that goes under finance costs is Interest

Key Tips

Office Wages = Administration Sales Wages = Distribution Expense Deprecation on Office Equipment =

Administration Depreciation on Delivery Van = Distribution

Office always implies Administration Cost

Key Tips

Prepayments- Current Asset = Left

Accrued Income- Current Asset = Left

Accrued Expense- Current Liability = Right

Income in advance- Current Liability = Right

Balanced Day Adjustments

If it says ‘invoices’ it means it is either Accounts Receivable or Accounts Payable and GST must be calculated

GST for any item purchased makes GST Payable go down or GST Receivable go up

GST for income makes GST Payable go up or GST Receivable go down

Balance Day Adjustment Tips

It is states the word ‘owing’ it is either Accrued income or Accrued Expense

Balance Day Adjustment Tips

One account name is always given to you in the question e.g. Invoice on hand for sales- Sales is the account name given

For any of the adjustments (Prepayment, Accrued Income, Accrued Expenses and Income in Advance, Depreciation expense) you will need to hand write these onto the Trial Balance

Balance Day Adjustment Tips

When calculating depreciation there are only ever two accounts affected- Accumulated Depreciation and Depreciation expense- NEVER abbreviate

Balance Day Adjustment Tips

Never include an item into the cash budget where ‘actual’ cash is not changing hands e.g. Depreciation, Drawings of inventory, Invoices, any Liabilities or Assets.

Always circle if there is a surplus or a deficit

Cash Budget Tips