t account format or statement?

[saba mushtaq]

Seniors kindly guide me about format to follow for individual's trading and profit and loss account and company's trading and profit and loss account and balance sheet


Repky urgent

[Linkin Park]

There are two formats used.
one is T-accounts: i.e. Trading and profit and loss account in which you record expenses and incomes and second is balance sheet in which you record assets and liabilities.

Other is financial statements: i.e. Income statement to record the income and expenses and for balance sheet is same.

Before using anyone of these methods you should know which method your company is using.

[Accountant]

Originally Posted by saba mushtaq

Seniors kindly guide me about format to follow for individual's trading and profit and loss account and company's trading and profit and loss account and balance sheet


Repky urgent

No one Uses T Account anymore they are just old presentation of Profit and Loss account and Balance Sheet and As per new Syllabus you have to follow the guidelines of ICAP/SECP/CO1984/IFRSs that means no T Account and don't forget to take a good look at Schedule 4 and 5 of Companies Ordinance 1984 Good luck

[aimtoachieve]

I tried to skim through the Fourth Schedule of Companies Ordinance, 1984, but there was no categorical instruction of making Profit and Loss Account in form of Income Statement, rather the verbatim term (Income Statement) is not mentioned at all. However, it does segregate different kinds of expenses (administrative expenses, other operating expenses). But, you can easily segregate these expenses in form of a T-Account also. So, why can't we go with T-account? I do not have Accounting background, so I am obviously speaking from a somewhat layman-viewpoint... shall be grateful if you clarify.

Secondly, when Balance Sheet is presented in form of statement, then the final balance will not be equal to the balance had the Balance Sheet been presented in a t-format? This is because in statement form, we first subtract current liabilities to calculate Net Assets, which are then shown to be equal to Capital, Loan, etc.? While in t-format current liabilities and capital are on the same side. Kindly clarify this too.

Regards

[Accountant]

Originally Posted by aimtoachieve

I tried to skim through the Fourth Schedule of Companies Ordinance, 1984, but there was no categorical instruction of making Profit and Loss Account in form of Income Statement, rather the verbatim term (Income Statement) is not mentioned at all. However, it does segregate different kinds of expenses (administrative expenses, other operating expenses). But, you can easily segregate these expenses in form of a T-Account also. So, why can't we go with T-account? I do not have Accounting background, so I am obviously speaking from a somewhat layman-viewpoint... shall be grateful if you clarify.

Secondly, when Balance Sheet is presented in form of statement, then the final balance will not be equal to the balance had the Balance Sheet been presented in a t-format? This is because in statement form, we first subtract current liabilities to calculate Net Assets, which are then shown to be equal to Capital, Loan, etc.? While in t-format current liabilities and capital are on the same side. Kindly clarify this too.

Regards

First you said you don't have accounting background so you are taking a huge risk second forth and fifth schedule just provide information that needs to be included in financial statements further normally professionals use same wording as used in these schedule and IAS 1 also provides guidance for presentation of Financial Statements I don't even understand why in CSS exams t accounts were being used in CA education as well as practically T-Accounts are used for ledgers and I have never encountered manual ledgers in my professional experience so i am just guessing from experience that at year end you close ledgers and every thing is dumped into PNL and BS ledger to complete closing procedures as far as presentation of financial statements is considered IAS 1, CO 1984 and SECP directives all require FS to be prepared in vertical format, standards are like laws there may be logic behind them but once enacted you must follow them.

As far as your second point is concerned you are mixing the concept of fund account and balance sheet and another thing I don't understand is that why aren't people taking a look at Published Financial Statements of companies you can find them at their website or in case of listed companies you can find them at website of Karachi Stock Exchange that can help you understand presentation of Financial Statements.

[aimtoachieve]

Thanks very much for your reply sir. I saw and read Fourth and Fifth Schedule of Companies Ordinance, 1984. Plus, I also saw financial statement of a company. I got an idea. There are three more questions which I wanted to ask:

(a) What about Profit and Loss Appropriation Account? We have to adjust those entries in Income Statement? Or we can make T-account of Profit and Loss Appropriation and then take appropriated profit in Balance Sheet (which will be in statement format)?

(b) In Partnership Final Accounts, when we are making Capital Accounts of partners, there also those accounts need to be in statement format (Statement of Partner's Capital)?

(c) Is Bank Reconciliation Statement included in CSS syllabus?

Regards

[Accountant]

Originally Posted by aimtoachieve

Thanks very much for your reply sir. I saw and read Fourth and Fifth Schedule of Companies Ordinance, 1984. Plus, I also saw financial statement of a company. I got an idea. There are three more questions which I wanted to ask:

(a) What about Profit and Loss Appropriation Account? We have to adjust those entries in Income Statement? Or we can make T-account of Profit and Loss Appropriation and then take appropriated profit in Balance Sheet (which will be in statement format)?

(b) In Partnership Final Accounts, when we are making Capital Accounts of partners, there also those accounts need to be in statement format (Statement of Partner's Capital)?

(c) Is Bank Reconciliation Statement included in CSS syllabus?

Regards

a)Profit and Loss Appropriation Account is also known as Retained earnings or accumulated profit or loss account or statement of changes in equity.

b)Yes its just statement of changes in equity with different format to show equity, drawings and accumulated profit or loss of each partner separately

c)Bank reconciliation is not included as per New Syllabus and I don't think it should be examined also as far as I can remember it hasn't been examine in last five attempts but any thing is possible.