Page 101 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

From trial balance to financial statements

Example 3

Required:

Using the balances for purchases, sales and carriage inwards cost,
assume the accounts are now closed off and transferred into the
statement of profit or loss account, complete the trading account below
to calculate the gross profit for the year.

Example 3: Solution

Capital
Dr $ Cr $
Inventory at Inventory at
31-May 1 May Nil 31 May 31 May 1,200

Remember that this section of the statement of profit or loss is also known as
the trading account i.e. that part of the statement of profit or loss used to
determine the gross profit for the accounting period.

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