Explain the process of preparing income statement and balance sheet.
Process of preparing income statement and balance sheet is as follows:
Income Statement:
1. Prepare a trial balance as per balance of different accounts in the ledger.
2. Determine revenue received from the business operation which is achieved by subtracting sales return from sales conducted.
3. Add incomes received other than revenue (such as cash discount, profit earned from sale of assets.
4. Deduct expenses from total revenue to determine profit before tax.
5. Deduct tax paid by company from the amount determined as profit before tax to arrive at Net Profit or Loss.
Balance Sheet:
Balance sheet consists of two parts: Equity and Liabilities and Assets.
1. The equity and liabilities contain shareholder funds, non-current liabilities, current liabilities and share application money pending allotment are recorded.
2. Assets are recorded next, it contains all non-current and current assets
3. Tally the total of both sides. It must be equal for the total to tally.
Process of preparing income statement and balance sheet is as follows:
Income Statement:
1. Prepare a trial balance as per balance of different accounts in the ledger.
2. Determine revenue received from the business operation which is achieved by subtracting sales return from sales conducted.
3. Add incomes received other than revenue (such as cash discount, profit earned from sale of assets.
4. Deduct expenses from total revenue to determine profit before tax.
5. Deduct tax paid by company from the amount determined as profit before tax to arrive at Net Profit or Loss.
Balance Sheet:
Balance sheet consists of two parts: Equity and Liabilities and Assets.
1. The equity and liabilities contain shareholder funds, non-current liabilities, current liabilities and share application money pending allotment are recorded.
2. Assets are recorded next, it contains all non-current and current assets
3. Tally the total of both sides. It must be equal for the total to tally.
