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BOOKKEEPING   35

The use of the term Balance Sheet has been avoided, as it is used sometimes to mean all three parts of the Financial Statement, and oftener to mean only the Statement of Assets and Liabilities

 

 

51. Steps to make the Financial Statement.—Illustration Set.

(a) Statement of Losses and Gains.

This statement is made from the loss and gain accounts, marked thus (,J), in the Trial Balance in Section 46 (c), and the Inventory in Section 49. In loss and gain accounts debtor balances are losses and creditor balances are gains.

  1. Merchandise Account : add the asset inventory to the creditor side, and take the difference

which is a creditor balance and therefore a gain—($305 + $2180) — $2400 = $85, gain.

  1. Expense Account : there is no Inventory, so that the debtor balance is a loss, $65.

  2. The difference between the gain and the loss is G. Grand's Net Gain—$85 — $65 = $20, Net

Gain.

(b) Summary of G. Grand's Account.

This statement is made from G. Grand's Account in the Trial Balance, and the Statement of Losses and Gains.

  1. G. Grand's Account : the Net Credit from the Trial,Balance is $3500.

  2. The Net Gain from the previous statement is $20.

  3. The Net Capital : add the Net Gain to the Net Credit—$3500 + $20 = $3520, Net Capital.

(c) Statement of Assets and Liabilities.

This statement is made from the asset and liability accounts, marked thus ( x ), in the Trial Balance, the Inventory, and the Summary of G. Grand's Account. Debtor Balances from the Trial Balance are Assets, and Creditor Balances are Liabilities.

  1. Cash Account : the debtor balance, $1420, is an asset.

  2. J. Speller's Account : the debtor balance, $80, is an asset.

  3. Bills Receivable Account : the debtor balance, $40, is an asset.

  4. Bills Payable Account : the creditor balance, $200, is a liability.

  5. Merchandise : the Inventory, $2180, is an asset.

  6. Expense : there is no Inventory.

  7. G. Grand's Net Capital : the balance from the Summary, $3520, is a deferred liability; the business owes the proprietor this amount after all the other liabilities are paid—it is, therefore, a deferred liability. This amount must just balance the Statement of Assets and Liabilities ; the difference between the ordinary assets and liabilities is always equal to the Proprietor's Net Capital, or Net Insolvency in the event of bankruptcy.


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