Exercise 15: Financial Reports

Exercise Overview

In this exercise you must prepare a Profit and Loss Statement and a Balance Sheet from a Trial Balance that you are provided. This exercise provides an opportunity to practise two important skills:

  1. The skill to identify which accounts will appear in the Profit and Loss Statement, and which will appear in the Balance Sheet.
  2. The skill to appropriately format the Profit and Loss Statement and the Balance Sheet

You are provided with an Excel workbook that contains a partially formatted Profit & Loss Statement and Balance Sheet. Furthermore, your job has been made much easier as each account in the Trial Balance has already been identified as one of the following types of account:

Exercise Instructions

To get started with this exercise you should download the Microsoft Excel Workbookthat contains the Trial Balance and the partially formatted Profit and Loss, and Balance Sheet.

It is suggested that this exercise will be easier if you print out the trial balance.

Once you have printed out the Trial Balance, begin at the top and copy the figures to the appropriate places in either the Profit and Loss or the Balance Sheet.

Make sure you save this Microsoft Excel Workbook regularly while carrying out the exercise.

Make sure you do the Profit and Loss Statement first. This is because you need the profit figure on the Balance Sheet.

For more information about the financial reports, what they contain and how they are formatted, follow the links below:

You may also need some assistance in dealing with "Provision for Depreciation". A Provision for Depreciation is a rather complicated way of saying the total of depreciation. Thus if a motor vehicle was bought for $20,000 and has a Provision for Depreciation of $15,000, then this means that the net value of this vehicle is judged to be only $5,000. In this case the Provision for Depreciation is the sum total of all the depreciation (every year) since the car was purchased. On the Balance Sheet, it is a requirement by law that all assets are correctly valued. The approved method for doing this is to show the purchase price, the total of depreciation (Provision for Depreciation) and the Net Book Value.

Here is an example:

Motor Vehicle at Cost 20,000  
less Provision for Depreciation 15,000 5,000

The net difference of $5,000 is the "Net Book Value" of the Motor Vehicle.

Answer to this Exercise

You can obtain an answer to this and all other accounting exercises on this website. Follow the link below:

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