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Final Accounts
References ：
Chapter 7 to 10 (P. 59-113)

1
A Trial Balance ( 試算表 )
A trial balance is a list of debit balances and c
redit balances in the books of accounts 。
The total of debit balances and the total of cr
edit balances are equal. If not, errors are ne
eded to identitied.
Trial balance is the basis for preparing final ac
counts (Trading and profit and loss A/C; Bala
nce Sheet).

2
Examples of Trial Balance ：
Leungs Company
Trial Balance
for the year ended 31 December, 2008
$ $
Sales 1010
Returns inwards 10
Stock as at 1 January, 2008 100
Purchases 530
Returns outwards 20
Carriages inwards 10
Rental income 100
Commission received 50
Rent 120
Commission 30
Electricity 150
Rates 50
 
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 $ $
Land and building 1000
Office Furniture 700
Fittings 500
Office equipment 500
Machinery 1000
Motor vehicles 500
Debtors 1500
Bank 400
Cash 80
Creditors 1000
Bank overdraft 500
Capital 3000
Drawings 100
Bank loan 1000
Loan － Mr. Cheung 600

7280 7280
Stock as at 31 December, 2008 is $120

4
 B Trading A/C
Gross profit:
• Function: Net Sales>Cost of sales
Calculate the gross profit or gross loss.

Net Sales － Cost of goods sold ＝ Gross profit /

Gross loss
Net Sales = Cost of goods sold =
Sales – Returns Opening stock ＋
inwards (Net Purchases+Carriage inwards)
- Closing stock
Gross loss:
Net Purchases =
Cost of sales>Net sales
Purchases – Returns
outwards 5
Put the above formulas ( 算式 ) into a st
atement, a Trading A/C is formed.
Trading A/c has vertical form and horizo
ntal form.

6
 Examples of vertical form ：
Leungs Company
Trading A/C
for the year ended 31 December, 2008
$ $ $
Sales 1010
Less ： Returns inwards 10
Net Sales 1000
Less ： Cost of goods sold
Stock as at 1 January,2006 100
Add ： Purchases 530
Less ： Returns outwards 20
Net purchases 510
Add ： Carriage inwards 10 520
620
Less ： Stock as at 31 December, 2006 120 500
Gross profit 500
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 Examples of horizontal form （ T form ）
Leungs Company
Trading A/C
for the year ended 31 December, 2008
$ $ $
Opening Stock 100 Sales 1010
Add ： Purchases 530 Less ： Returns inwards 10
Less ： Returns outwards 20 Net Sales 1000
Net purchases 510
Add ： Carriage inwards 10 520
620
Less ： Closing stock 120
Cost of goods sold 500
Gross profit c/d 500
1000 1000

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 C Profit and loss A/C

•Functions: calculate the net profit / net

loss. Net profit:
Gross profit+Income>Expenses

Gross profit ＋ Other income － Expenses ＝ Net profit / Net loss

Net loss:
Other income=
Expenses>Gross profit+Income
rental income + commission income+…

Expenses=rent and rates+commission

+electricity+ …
9
Put the above formulas ( 算式 ) into a st
atement, a Profit and loss A/C is formed
.
Trading A/c has vertical form and horizo
ntal form.

10
 Vertical form ：
Leungs Company
Profit and loss
for the year ended 31 December, 2008
$ $
Gross profit 500
Add ：Rental income 100
Commission income 50
650
Less ： Expenses
Rent 120
Commission 30
Electricity 150
Rates 50 350
Net Profit 300
 

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 Examples of horizontal form (T form) ：
Leungs Company
Profit and loss A/C
for the year ended 31 December, 2006
$ $
Rent 120 Gross profit b/d 500
Commission 30 Rental income 100
Electricity 150 Commission income 50
Rates 50
Net profit 300
650 650

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 D Balance Sheet
Balance sheet is a statement to record
the balances of assets, liabilities and
capital at the end of the accounting period.
Assets* ＝ Liabilities** ＋ Capital***
*Assets ＝ Non-current assets ＋ Current assets
**Liabilities ＝ Current liabilities ＋ Long-term liabilities
***Capital:
Opening capital ＋ Net profit － Capital ＝ Closing capital

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D1 Non-current Assets
Non-current assets have a long life and
are to be used in the business.
The non-current assets is not bought
for resale.
E.g. Land and building, Furniture,
Fixtures and fitting, Office equipment,
Machinery, Motor vehicles…

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Non-current assets are listed in the
order of “permanency” in the Balance
Sheet are as follows:
Non-current assets
Land and building
Furniture
Fixtures and fittings
Office equipment
Machinery
Motor vehicles

15
D2 Current assets
Current assets are likely to be
converted into cash in the short term
(i.e. within 1 year) or items having a
short life.
E.g. Stock, Debtors, Prepayment, Bank,
Petty cash, Cash…

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Current assets are listed starting the
most difficult to be turned into cash,
and the last one is “Cash”:

Current assets
Stock
Debtors
Prepayment
Bank
Cash
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D3 Long-term Liabilities
Long-term liabilities do not have to hav
e in the near future (i.e. longer than 1 y
ear)
e.g. Bank loan, Loan: Mr. Cheung, Debe
ntures…

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 D4 Current liabilities
Current liabilities are to be paid in the
near future (i.e. within 1 year).
e.g. ： Creditors, Accruals, Bank
overdraft…
Current assets － Current liabilities ＝ Working Capital

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Balance Sheet has vertical form and
horizontal form.
The format of vertical is as follows:

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 Leungs Company
Balance Sheet
as at 31 December, 2008
$ $ $
Non-current assets
Land and building 1000
Furnitures 700
Fixtures and fittings 500
Office equipment 500
Machinery 1000
Motor vehicles 500 4200
 

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 $ $ $
Current assets
Stock 120
Debtors 1500
Bank 400
Cash 80 2100
 Less ： Current liabilities
Debtors 1000
Bank overdraft 500 1500
Working capital 600
4800
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 $ $ $
Capital
Capital as at 1 January, 2008 3000
Add ： Net profit 400
3400
Less ： Drawings 100
Capital as at 31 December, 2008 3300
Long-term Liabilities
Bank loan 1000
Loan － Mr. Cheung 500 1500
480023
 Horizontal form （ T form ）：
Leungs Company
Balance Sheet
As at 31 December, 2006
$ $ $ $
Fixed assets Capital
Land and buildings 1000 Capital as at 1 January, 2008 3000
Furniture 700 Add ： Net profit 300
Fixtures and fittings 500 3300
Office equipment 500 Less ： Drawings 100
Machinery 1000 Capital as at 31 December, 2008 3200
Motor vehicles 500 4200 Long-term Liabilities
Current assets Bank loan 1000
Stock 120 Loan-Mr. Cheung 600 1600
Debtors 1500 Current Liabilities
Bank400 Creditors 1000
Cash 80 2100 Bank overdraft 500 1500 6300
6300

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