In the previous lessons, we have explained the method of preparing financial statements in companies in general, explained their items, and gave examples of the method of preparing financial statements for service establishments, which you can review from here. The method of preparing financial statements in service establishments does not differ from the method of preparing them in commercial establishments. Finance in commercial establishments contains accounts for merchandise operations.
Income statement of commercial establishments
This list is prepared to find out the result of the company’s work in terms of profit or loss at the end of the financial period. In the previous lessons, we explained the method of preparing the income statement in general, and we explained the elements and items of the income statement, and we gave examples of how to prepare the income statement in service organizations, which you can review from here. Either In commercial establishments, the total income is reached by finding the result of the difference between the net sales and the cost of sales. If the net sales are greater than the cost of sales, the result is a total profit, but if the opposite is the result, the result is a total loss, then the operating expenses and other expenses are subtracted. Adding other revenues and so on until the final net income is reached. The form of the income statement in commercial establishments differs according to the inventory system used, due to the difference in the method of extracting the cost of goods sold. This is a form of the income list according to the continuous inventory system.
This list is prepared to find out the result of the company’s work in terms of profit or loss at the end of the financial period. In the previous lessons, we explained the method of preparing the income statement in general, and we explained the elements and items of the income statement, and we gave examples of how to prepare the income statement in service organizations, which you can review from here. Either In commercial establishments, the total income is reached by finding the result of the difference between the net sales and the cost of sales. If the net sales are greater than the cost of sales, the result is a total profit, but if the opposite is the result, the result is a total loss, then the operating expenses and other expenses are subtracted. Adding other revenues and so on until the final net income is reached. The form of the income statement in commercial establishments differs according to the inventory system used, due to the difference in the method of extracting the cost of goods sold. This is a form of the income list according to the continuous inventory system.
Calculate cost of sales
The cost of sales represents the cost of the goods sold during the financial period, which differs in the way it is extracted in commercial establishments according to the inventory system used. According to the continuous inventory system, a special account is opened in the name of the cost of sales. Income is as in the model above, but in establishments that use the periodic inventory system, the cost of sales is equal to the goods of the beginning of the period plus net purchases (total purchases - returns of purchases - discount acquired) plus the expenses of purchases and minus the goods of the end of the period as follows:
The cost of sales represents the cost of the goods sold during the financial period, which differs in the way it is extracted in commercial establishments according to the inventory system used. According to the continuous inventory system, a special account is opened in the name of the cost of sales. Income is as in the model above, but in establishments that use the periodic inventory system, the cost of sales is equal to the goods of the beginning of the period plus net purchases (total purchases - returns of purchases - discount acquired) plus the expenses of purchases and minus the goods of the end of the period as follows:
Account closures
In the account closing lesson, we have explained the method of closing the revenue and expense account in service establishments, and the accounts in commercial companies are closed in the same way by closing the sales account and the accounts for purchases and expenses in the profit and loss account (income summary) as follows:
In the account closing lesson, we have explained the method of closing the revenue and expense account in service establishments, and the accounts in commercial companies are closed in the same way by closing the sales account and the accounts for purchases and expenses in the profit and loss account (income summary) as follows:
1 Closing accounts for purchases, expenses and other debit balances:
The accounts of purchases, expenses and other debit balances are closed in the profit and loss account (income summary) by making them credit as follows:
The accounts of purchases, expenses and other debit balances are closed in the profit and loss account (income summary) by making them credit as follows:
Recording closing expenses and other debit balances
Debtor creditor statement
xxx
From H/Profit and Loss (income summary)
Debtor creditor statement
xxx
From H/Profit and Loss (income summary)
to mentioned
xxx h/pd
xxx h/purchasing expenses
xxx h/ sales returns
xxx h/discount allowed (sales discount)
xxx h / general and administrative expenses
xxx h/ selling and marketing expenses
xxx h/other expenses and losses
Closing the expense account and other losses
2 Close sales and other credit balances:
Sales and other credit balances are closed in the profit and loss account (income summary) by making them debit as follows:
Revenue closing entry:
Debtor creditor statement
Debtor creditor statement
of those mentioned
xxx
h/ sales
xxx
H/ Purchase returns and their allowances
xxx
h/ discount earned (discount on purchases)
xxx
H/ other revenues and earnings
xxx to h/profit and loss (income summary)
Closing the account of revenues and other gains
3 Close the profit and loss account (income summary):
After the accounts shown in the income statement are closed in the income summary account, the balance of the income summary will appear credit in the case of profit, that is, when the net sales and other revenues are greater than the cost of sales and other expenses, but if the balance is debit, this means that the establishment has achieved a loss, that is, when the cost Sales and other expenses are greater than net sales and other revenues, and whether the balance is debit or credit, it is closed in the capital account or the current account of the owner of the facility or in the account of retained profits and losses as follows:
In the case of profit:
Debtor creditor statement
xxx
From H/Profit and Loss (income summary)
Debtor creditor statement
xxx
From H/Profit and Loss (income summary)
xxx to h/neighbor owner of the facility or the capital or account of A.K. withheld
Closing the account of A.K. in the account of the owner of the establishment or the account of the capital or the account of A.K. is held
In case of loss:
Debtor creditor statement
xxx
From H/Neighbour, the owner of the facility, the capital, or the account of A.K. is withheld
xxx to h/profit and loss (income summary)
Closing the account of A.K. in the account of the owner of the establishment or the account of the capital or the account of A.K. is held
Add New Comment