FORMATS
INCOME STATEMENT OF A SOLE TRADER /PARTNERSHIP( TRADING BUSINESS)
$ $
Sales Xxx
(-)Sales Return (xxx)
Net Sales xxx
(-) Cost of Sales
Inventory at start xxx
(+)Purchases xxx
(-)Goods withdrawn (xxx)
(-)Purchase Returns (xxx)
(+)Carriage Inwards xxx
(-)Inventory Loss/Stolen (xxx)
(+)Any other direct purchasing expense xxx
(-)Inventory at End (xxx) (xxx)
Gross Profit xxx
(+)Other Incomes
Discount Received xxx
Decrease In provision for doubtful debts xxx
Bad debts Recovered xxx
Gain on Disposal xxx xxx
(-) Expenses and Losses
Discount Allowed xxx
Rent and Rates xxx
Other Expenses xxx
Bad debts xxx
Creation/Increase In Provision for doubtful debts xxx
Depreciation for the year on non current assets xxx
Loss on disposal xxx
Interest on loan/overdraft xxx (xxx)
Profit for the Year/Loss for the year Xxx/(xxx)
INCOME STATEMENT OF A SOLE TRADER /PARTNERSHIP ( SERVICE BUSINESS)
$ $
Incomes :
Fees Income xxx
Commission Income xxx
Discount Received xxx Xxx
(-)Expenses :
Wages and Salaries xxx
Depreciation for the year of non current assets xxx
Rent and Rates xxx
Bad debts xxx
Discount Allowed xxx
Other Expenses xxx
Interest on loan /Overdraft xxx
Loss on disposal ( show in income if gain) xxx
Provision for doubtful debts ( show in income if decreased) xxx (xxx)
Profit for the Year/Loss for the year xxx/(xxx)
Statement of Financial Position for a Sole trader
COST DEPN NBV
Non Current Assets
Land and Buildings xxx (xxx) xxx
Motor Van xxx (xxx) xxx
Plant and Machinery xxx (xxx) xxx
xxx xxx xxx
Current Assets
Closing Inventory xxx
Trade Recieveables xxx
(-) Provision for doubtful debts (xxx) xxx
Other Receivables xxx
Cash at Bank xxx
Cash in Hand xxx xxx
Total Assets XXX
Capital
Capital at start xxx
(+) Profit for the year xxx
(+) Additional Capital introduced xxx
(-) Drawings (xxx) xxx
Non Current Liabilities
Long term Loan xxx
Current Liabilities
Trade Payables xxx
Other Payables xxx
Bank Overdraft xxx xxx
Total Capital and Liabilities XXX
Note :
1. If Loss for the year then it should be subtracted from capital at start just like profit is being added
2. The order of current assets is super important
3. Other Receivables include prepaid expenses and accrued(owing) incomes
4. Other Payables include accured( owing ) expenses and prepaid incomes.
5. Trade Receivables should be shown after bad debts and provision to be shown separately
Profit and Loss Appropriation Account ( Only in Partnership)
$ $
Profit for the year ( From Income statement) xxx
(+) Interest on drawings
Alex xxx
Barry xxx xxx
(-) Interest on capital
Alex xxx
Barry xxx (xxx)
(-) Salary/Bonuses
Alex (xxx)
Profit to be Shared ( Residual Profit ) xxx
Alex xxx
Barry xxx
Current Accounts of Partners In Columnar Form
Alex Barry Alex Barry
Balance b/d xxx Balance b/d xxx
Interest on drawings xxx xxx Interest on capital xxx xxx
Drawings xxx xxx Salary xxx
Balance c/d xxx Share of profit xxx xxx
Balance c/d Xxx
xxx xxx xxx xxx
Balance b/d Xxx Balance b/d xxx
Note :
1.Balance b/d are starting balances , they can be on either side depending on the situation at start.
2. If there is Loss then Share of loss will come on debit side
3. Balance c/d are closing balances, they can be on either side depending on the situation at end .
4. Debit balance means partner owes the business ( Overdrawing) ( negative balance)
5. Credit balance means business owes the partner ( His money is with the business) positive balance
Statement of Financial Position for a Partnership
COST DEPN NBV
Non Current Assets
Land and Buildings xxx (xxx) xxx
Motor Van xxx (xxx) xxx
Plant and Machinery xxx (xxx) xxx
xxx xxx xxx
Current Assets
Closing Inventory xxx
Trade Recieveables xxx
(-) Provision for doubtful debts (xxx) xxx
Other Receivables xxx
Cash at Bank xxx
Cash in Hand xxx xxx
Total Assets XXX
Capital
Capital of Alex xxx
Capital of Barry xxx
Current Account of Alex (xxx)
Current Account of Barry xxx xxx
Non Current Liabilities
Long term Loan xxx
Current Liabilities
Trade Payables xxx
Other Payables xxx
Bank Overdraft xxx xxx
Total Capital and Liabilities XXX
Note :
1. Current account credit balance is added and debit balance is subtracted
2. No need to show profit/loss or drawings as they are already done in current accounts
3. The order of current assets is super important
4. Other Receivables include prepaid expenses and accrued(owing) incomes
5. Other Payables include accured( owing ) expenses and prepaid incomes.
6. Trade Receivables should be shown after bad debts and provision to be shown separately
Income Statement of A limited Company
$
Sales /Revenue xxx
Cost of Sales (xxx)
Gross Profit xxx
Other Income xxx
Administrative Expenses (xxx)
Distribution Cost (xxx)
Profit from Operations xxx
Finance charges /Finance Cost (xxx)
Profit For the year xxx
Notes:
1. Only the above items can be shown on the income statement.
2. Administrative includes :Administrative given in trial balance + Discount allowed/Bad debts/Provision
for doubtful debts/Depreciation of Equipment etc.
3. Distribution Cost includes: Distribution given in trial balance + Carriage outwards + any delivery
related expenses ( like depreciation of delivery vehicle )
4. Finance Cost is the Interest expense which includes interest on debentures/Loan or Overdraft.
Statement of Changes in Equity ( Limited Companies Only)
Notes:
Share Revaluation Share General Retained TOTA
Capital Reserve premium Reserve Earnings L
Balance at Start xxx xxx xxx xxx xxx xxx
Profit for the year xxx xxx
Transfer (xxx) xxx -
Bonus Issue xxx (xxx) (xxx) (xxx) -
Issue of share/Rights issue xxx xxx xxx
Gain revaluation xxx Xxx
Loss revaluation (xxx) (xxx) (xxx)
Dividends Paid (xxx) (xxx)
Balance At End xxx xxx xxx xxx xxx xxx
1. For Bonus issue ,first use share premium then general reserve and then retained earnings
2. Loss on revaluation is first deducted from revaluation reserve and then from retained earnings
3. If loss for the year then must be subtracted from retained earnings
4. Ordinary Share Capital or Share Capital is same thing as now we only have one type of shares i.e.
Ordinary Shares
Statement of Financial Position of a Limited Company
$
Non Current Assets xxx
Current Assets
Inventory xxx
Trade and Other Receivables xxx
Cash and Cash Equivalent xxx
xxx
Total Assets XXX
Equity
Share Capital xxx
Share Premium xxx
Revaluation Reserve xxx
General Reserve xxx
Retained Earnings xxx
xxx
Non Current Liabilities
Debentures/Loans xxx
Current Liabilities
Trade and other payables xxx
Cash and Cash Equivalent xxx
xxx
Total Equity and Liabilities XXX
NOTES:
1. All Non current Assets must be shown together as one value
2. Trade and Other Receivables are combined. Also provision for doubtful is not shown but its directly
deducted.
3. Trade and Other Payables are combined
4. All Balance at end from Statement of Changes in Equity Go to the Equity Section .
Accounts For Non Current Assets
(i) Non Current Asset Cost Account
Balance b/d xxx Disposal xxx
Bank/Cash/Disposal xxx Balance c/d xxx
xxx xxx
Balance b/d xxx
Notes:
Disposal on the debit side only comes when there is a part exchange
Disposal on the credit side is the Original cost of the Asset Sold
(ii) Provision For Depreciation Account
Disposal xxx Balance b/d xxx
Balance c/d xxx Income Statement xxx
xxx xxx
Balance b/d xxx
Note :
Disposal is the total depreciation of the asset sold
Income statement is the total depreciation for that financial year
(iii) Disposal Account
Cost of Non current Asset xxx Provision For Depn xxx
Income statement (gain) xxx Bank/Cash/Trade In xxx
Income statement (Loss) xxx
xxx xxx
Accounts For Incomes and Expenses
EXPENSE ACCOUNT
Prepaid b/d xxx Owing b/d xxx
Bank/Cash xxx Income Statement xxx
Owing c/d xxx Prepaid c/d xxx
xxx xxx
Prepaid b/d xxx Owing b/d xxx
INCOME ACCOUNT
Owing b/d xxx Prepaid b/d xxx
Income Statement xxx Bank/Cash xxx
Prepaid c/d xxx Owing c/d xxx
xxx xxx
Owing b/d xxx Prepaid b/d xxx
Accounts For Bad debt / Provision for Doubtful Debts and Bad Debt
Recovered
BAD DEBT ACCOUNT
Mr. Azam xxx Income Statement xxx
Mr. Gulbahar xxx
Miss Mary xxx
xxx xxx
BAD DEBT RECOVERED ACCOUNT
Income Statement xxx Mr . Johnson xxx
Mr Khalid xxx
xxx xxx
Both the above accounts and closed with income statement there are no
balance b/d or c/d
Provision For Doubtful Debts Account
In case of increase in pr ovision
Balance c/d xxx Balance b/d xxx
Income Statement xxx
xxx xxx
Balance b/d xxx
In case of decrease in provision
Income Statement xxx Balance b/d xxx
Balance c/d xxx
xxx xxx
Balance b/d xxx
CONTROL ACCOUNTS
SALES LEDGER CONTROL ACCOUNT
Balance b/d xxx Balance b/d (min) xxx
Credit Sales xxx Sales Return xxx
Bank (Dishonored ) xxx Bad debts xxx
Interest Charged to Costumers xxx Bank/Cash ( Receipts) xxx
Bank/Cash ( Refund) xxx PLCA ( Setoff) xxx
Bad debt recovered xxx Cash/Bank ( Bad debt Recovered) xxx
Balance c/d (min) xxx Discount Allowed xxx
Balance c/d xxx
XXX XXX
Balance b/d Balance b/d ( min) Xxx
PURCHASE LEDGER CONTROL ACCOUNT
Balance b/d (min) xxx Balance b/d xxx
Purchase Returns xxx Purchases xxx
Bank/Cash ( Payments) xxx Interest Charged by Suppliers xxx
SLCA (Setoff) xxx Bank/Cash ( Refund) xxx
Discount Received xxx Balance c/d (min) xxx
Balance c/d xxx
XXX XXX
Balance b/d ( min) xxx Balance b/d xxx
BANK RECONCILATION
BANK RECONCILATION STATEMENT
$
Balance As per Bank Statement xxx
(+) Uncredited deposits/Cheques/Bank lodgements xxx
(-) Unpresented Cheques xxx
(+)/(-) error on the bank statement ( if any) xxx
Balance As per Updated Cash book xxx
Updated Cashbook
Balance b/d ( if debit) xxx Balance b/d (if overdraft) xxx
Credit Transfer/Bank Giro Standing Order
Interest Received Direct Debit
Interest Charged
Bank Charges
Dishonoured cheque
Balance c/d ( if Overdraft) xxx Balance c/d ( if debit) xxx
xxx xxx
Balance b/d ( if debit) xxx Balance b/d( if overdraft) xxx
LEDGER ACCOUNTS OF COMPANIES (EQUITY
ITEMS)
Share Capital ( Ordinary Share Capital)
Balance b/d xxx
Bank ( In case of issue/rights issue) xxx
Share Premium ( In case of bonus issue) xxx
Balance c/d xxx Retained Earnings( In case of bonus xxx
issue)
xxx xxx
Balance b/d xxx
Share Premium
Share Capital ( In case of bonus xxx Balance b/d xxx
issue)
Balance c/d xxx Bank (In case of issue/rights issue) xxx
xxx xxx
Balance b/d xxx
Retained Earnings
Share Capital ( In case of bonus xxx Balance b/d xxx
issue)
Transfer to General Reserve xxx Profit for the year xxx
Dividends Paid xxx
xxx xxx
Balance b/d xxx
General Reserve
Balance b/d xxx
Balance c/d xxx Retained Earnings xxx
xxx xxx
Balance b/d xxx
COSTING PROFIT STATEMENTS
ABSORPTION
$ $
Sales xxx
Cost of Production
Inventory at start xxx
Direct Material xxx
Direct Labour xxx
Variable Production Overheads xxx
Fixed Production Overheads xxx
Inventory at End (xxx)
(+) Underabsorbed (-) Overabsorbed xxx(xxx) (xxx)
Gross Profit xxx
Non Production Cost
Variable Selling overheads xxx
Fixed Admin and Selling Overheads xxx (xxx)
Profit for the year xxx
MARGINAL
$ $
Sales xxx
Variable Cost
Inventory at start xxx
Direct Material xxx
Direct Labour xxx
Variable Production Overheads xxx
Variable Selling Overheads xxx
Inventory at End (xxx) (xxx)
Contribution xxx
Fixed Cost
Fixed production overheads xxx
Fixed Admin and Selling Overheads xxx (xxx)
Profit for the year xxx
Notes
-Inventory is valued at DM+DL+VPOH+FPOH(per unit) in Absorption
-Inventory is valued at DM+DL+VPOH in Marginal
-Make 4 columns instead of 2 if data is for 2 years.
Reconciliation Statement for two profits
$
Profit As per Absorption Costing xxx
(+) difference in opening inventory xxx
(-) difference in closing inventory (xxx)
Profit As per Marginal Costing xxx
Note: ( Important )
1. Can also be made in reverse , starting from marginal profit.
2. If inventory is not there or doesn’t change ( opening inventory units are equal to closing
inventory units )then both marginal and absorption will give same profit
3. If inventory level is rising ( closing inventory is more then opening inventory) then Absorption
will give higher profits
4. If inventory level is decreasing ( opening inventory is more then closing inventory) then
Marginal will give higher profits
INVENTORY VALUATION ( FIFO AND AVCO)
Example :
Opening Inventory :100 units @$20 each
Purchased : 200 units @ $30 each
Sold : 160 units ( selling price doesn’t matter)
Closing Inventory = 140 units ( 100+200-160)
FIFO (PERPETUAL)
Purchases Sales Balance
Date Qty Rate Value Qty Rate Value Qty Rate Value
1st March 100 20 2000
2nd March 200 30 6000 100 20 2000
200 30 6000
8000
5th March 100 20 2000
60 30 1800 140 30 4200
AVCO(PERPETUAL)
Purchases Sales Balance
Date Qty Rate Value Qty Rate Value Qty Rate Value
1st March 100 20 2000
2nd March 200 30 6000 200 30 6000
300 26.67 8000
5th March 160 26.67 4267 140 26.67 3733
EXAM TIPS
PAPER 1
You have 60 minutes of 30 mcqs. 2 minutes for each.
First only attempt those questions which you are 100% sure of and skip others.
Read the MCQ carefully, because CIE likes to play around.
Now spend time on these questions.
If you are stuck try to eliminate the most obvious wrong answer.
5-6 questions are theoretical, at least read them thrice.
Sometimes it’s best to use the answer to check if it’s wrong or right.
If you see something in the answer choice which you haven’t heard of (that can never be the
answer).
Please don’t leave it blank. Take an educated guess. There is no negative marking.
PAPER 2
You have 105 minutes for 90 marks.
Always attempt the question which you know the best out of 4 first. This will give you
confidence and save time. You will end up spending time and getting it wrong if you do the
toughest one first.
Don’t panic, usually in every paper one question is tricky. Do it at last.
You won’t get any award if you balance the statement of financial position. If it is off by a large
amount, that doesn’t mean everything is wrong, might be a single big figure which you have
missed. DON’T WASTE YOUR TIME.
Remember you don’t have to get 90 on 90. Go for the maximum
HOPE THIS HELPS ☺
