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How is profit calculated from trial balance and bank statements?
Wiki User
∙ 12y ago
Put simply, profit = bank balance + income - expenditure.
Take a cake shop as an example. An accountant would note the opening balance of the shop's bank account at the start of the financial year. He would then add to that all the money taken in the shop over the year from selling cakes etc. Then he would deduct things like the cost of buying the cakes from the supplier, the running costs of the shop (electricity etc) and staff wages. Whatever figure is left after all the expenses have been deducted - is profit.
Wiki User
∙ 12y ago
Profit is calculated by comparing the income and expenses recorded in the trial balance with the transactions recorded in the bank statements. The trial balance provides a summary of all income and expenses for a given period, while the bank statements show the actual cash inflows and outflows. By reconciling any differences and adjusting for non-cash transactions, the final result is the profit earned during the period.
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What is the importance of the trial balance in the preparation of a financial statement?
The trial balance is the source document for the preparation of any financial statements. A trial balance is a list of all the account codes with the current balances and the first step to prroduction of the financial statements is checking to see if it balances. If it doesn't then you're in serious trouble as there is a major flaw in your financial records. When constructing the profit and loss account in the financial statements you simply group together the income and expense accounts from the trial balance into convenient groupings and the resulting total is the profit or loss of the business. The balance sheet is contructed by simply taking all the balance sheet accounts from the financial statements, again grouping together into convenient groupings. The profit or loss calculated in the profit and loss earlier is the retained profit for the period that is entered at the bottom of the balance sheet to ensure it balances
What is the difference tween trial balance before closing and the trial balance after closing?
before we find gross profit ,after we got net profit
Financial statements are directly prepared from?
Adjusting Trial Balance
How do you finalise the accounts at the end of year?
Finalization of Accounts: It is the accounts of Finanical Statement / Balance Sheet, Income / Earning statement / Profit & Loss A/c & All Ledgers which is finally accounted in Trial Balance for the company.
Is profit and loss account given in trial balance a liability?
no
Prepare financial statements directly from an adjusted trial balance?
Yes
What are the kinds of trial balance?
The main aspect of in accounting stytem are ddepending up on Trial balance, These are preparing on the basis of ledger accouns. The trial balance are only statements not an Accounts. These are divided into 3 types 1) VERTICAL TRIAL BALANCE 2) HORIGENATL TRIAL BALANCE 3) MULTI TRIAL BALANCES Explanation:-
What is called to bookkeeping?
Keeping the record of every business transaction to main the financial accounts is called the bookkeeping. Bookkeeping starts from a voucher and leads to the financial statements, including, trial balance, profit and loss account and balance sheet.
What are the 7 steps in the accounting cycle?
Base transactions, journalise, post to accounts, trial balance, adjustments, adjusted trial balance, financial statements.
How to balance sheet finalize?
This is rather a long process. When closing the books (preparing your financial statements) for the ending accounting period you want to end with your Balance Sheet. First you prepare a trial balance, then an adjusted trial balance, finally a post closing trial balance. Note that these are basic, these do not include other statements such as Income Statement, Statement of Retained Earnings, Statement of Owners Equity, to name a few. After all the statements are are processed, all expense accounts, earning accounts etc, are closed out, then the remaining accounts (Assets, Liabilities, & Owners Equity) accounts are listed on the balance sheet. Remember the Balance sheet will show net profit (or loss) for that company during the financial period.
How will a company use the adjusted trial balance?
The companies will use the adjusted trail balance to create the financial statements.
Why is it necessary to prepare the formal financial statements if all the data are on the adjusted trail balance?
Yes! The adjusted trial balance is the first step in preparing the financial statements. As that is done, completing the financial statements are relatively easy. The trial on it's own is difficult for people to understand.
