Duration: 60

mins
Slides: 9

LMT SCHOOL OF MANAGEMENT, THAPAR

UNIVERSITY
Masters of Business Administration

Course: Financial Reporting and Analysis

Faculty: Dr. Sonia Garg (Email:
sonia.garg@thapar.edu)

Session 6: Process of Preparation of Financial

Statements: Income Statement and Balance Sheet
from Trial Balance

Analysis of Trial Balance

To bifurcate the trial balance into P/L and B/S
First identify each account in trial balance as
either of the following
Asset (Current, non-current)
Liability (Current, non-current)
Owners Equity
Expense
Income

Purchases sold are

expenses and
Purchases unsold
are assets

Allocate assets, liabilities and owners equity to

B/S
Allocate expenses and income to P/L
8/17/15

Process of Preparation of Financial

Statements: Income Statement
and Balance Sheet from Trial

8/17/15

Process of Preparation of Financial

Statements: Income Statement
and Balance Sheet from Trial

Need for Adjustment

Matching Principle
Scooter
Furniture
Depreciation Office
Equipment
Interest Expense
Loan for
Scooter
Prepaid Expenses
Salaries and Wages due
Purchases sold and unsold
Purchases: 150

Sold: 60; Unsold:

90

8/17/15

Process of Preparation of Financial

Statements: Income Statement
and Balance Sheet from Trial

8/17/15

Process of Preparation of Financial

Statements: Income Statement
and Balance Sheet from Trial

Assumed FIFO
method for
inventory valuation

8/17/15

Process of Preparation of Financial

Statements: Income Statement
and Balance Sheet from Trial

8/17/15

Process of Preparation of Financial

Statements: Income Statement
and Balance Sheet from Trial

8/17/15

Process of Preparation of Financial

Statements: Income Statement
and Balance Sheet from Trial

Analysis of Financial
Statements

Return on Investment
Owners Equity = Assets - Liabilities

8/17/15

Process of Preparation of Financial

Statements: Income Statement
and Balance Sheet from Trial