Explain the process of preparing income statement and balance sheet.
The process of preparing income statement is explained below
(i) First of all a Trial Balance is prepared on the basis of the balances of various
accounts in the ledger.
(ii) After that trading account is prepared by recording Opening Stock, Purchases, Manufacturing Expenses and other direct expenses on the debit side.
(iii) On the other hand sales and closing stock is recorded on the credit side of the trading account.
(iv) After that the balancing figure of trading account is determined by totalling
both the sides, if the credit side exceeds the debit side, then the balancing figure
is termed as gross profit, but if the debit side exceeds the credit side, then the
balancing figure is termed as gross loss.
(v) Carry forward the Gross Profit (Gross Loss) to the credit (debit) side of the
Profit and Loss Account.
(vi) After that all the operating and non-operating revenue expenditures with
their relevant adjustments are recorded on the debit side of the profit and loss
account. Record all current year’s operating and non operating revenue incomes
with their relevant adjustments on the credit side of the profit and loss account.
(vii) Ascertain the balancing figure by totalling both the sides of the profit and
loss* account. If the credit exceeds the debit side, then the balancing figure is
termed as net profit, but if the debit side exceeds the credit side, then the
balancing figure is termed as net loss. The process of preparing Balance Sheet is given below
(i) First of all match the total of both the side of trail balance. If there is any
difference in the debit side of trail balance it will be posted in assets side of
balance sheet and if there is any difference in credit side of balance sheet it will
be posted in the liabilities side of the balance sheet.
(ii) Record all the debit balances of real and personal accounts on the left hand
side (i.e., Assets side) of the balance sheet after making all adjustments for
provision and other related items.
(iii) Record all the credit balances of real and personal accounts on the right hand side (i.e., Liabilities side) of the balance sheet after making all adjustments for interest and outstanding items.
(iv) Add Net Profit to the opening capital and deduct Net Loss, if any from the opening capital.
(v) Acertain the total of two sides, which must be equal.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
This question is important because it tests key concepts from the NCERT syllabus and is frequently asked in CBSE exams.
This question is based on core NCERT concepts explained in the chapter and should be revised thoroughly before exams.
Students often lose marks by skipping steps, writing incomplete explanations, or misunderstanding keywords used in the question.
The process of preparing income statement is explained below
(i) First of all a Trial Balance is prepared on the basis of the balances of various
accounts in the ledger.
(ii) After that trading account is prepared...
Step-by-step explanation:
• The process of preparing income statement is explained below
•
• (i) First of all a Trial Balance is prepared on the basis of the balances of various
• accounts in the ledger
•
Stay updated with our latest educational content and study tips
Pay upfront, or pay off less and over time? The truth depends on four factors most consumers will never compare at the same time: the interest rate on the house loan, the interest rate on the savings account, the rate of home price appreciation, and the cost of renting the home until you actually buy … Read more
Read More
Thirty is when the question starts to get raised and you’re able to do something because you know you have the experience—you know you have the responsibility. Here are some ways to consider the choice based on a realistic assessment without idealizing either aspect. Restlessness is one of those things that appears in your early … Read more
Read More
It’s not about starting over if you took a break to care for children, take care of yourself, be healthy or for any other reason. This is a realistic strategy for the recovery of skills, selection of the right job, and overcoming the resume problem. One year, three years or 10 years of a career … Read more
Read More
There’s no need to score 95% or achieve a JEE/NEET rank. You don’t need to score 95% or rank in JEE/NEET to build a solid career. A candid and pragmatic guide to the routes that actually work for students who have an average mark and what to do when faced with the options. If … Read more
Read More
Student Discussion
Be the first to comment.
ADD NEW COMMENT