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Chapter 4

Preparation of financial statements

3.1 Statement of profit or loss

When the trial balance has been completed we can progress to preparation of the
statement of profit or loss. This will contain any balances relating to income (mainly
sales revenue) or expense accounts.

 At the end of an accounting period any amounts that relate to that period are
transferred out of the income and expenditure accounts into another ledger
account called ‘the statement of profit or loss’.

 This is done by closing the account.

 Do not show a ‘balance c/f’ or ‘balance b/f’ but instead put the balancing figure
on the smallest side and label it ‘statement of profit or loss’.

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