Advanced Financial

Accounting
FIN-611
Mian Ahmad Farhan
Lecture-21
Limited Companies




Company Accounts
Owners Equity
Sole Proprietorship
Opening capital xxx
Add Net profit xxx
Less Drawings xxx
xxx
Partnership
Capital Account xxx
Add/Less Current Account xxx
xxx
Company
Capital xxx
Reserves xxx
xxx
Sole proprietorship Owner Sole Proprietor Sole proprietorship Owner Sole Proprietor
Partnership Owner Partners
Company Owner Share holders/
Members


Journal Entries
Capital Introduced
Sole Proprietorship
Cash A/c xxx
Capital A/c xxx
Partnership
Cash A/c xxx
Partners Capital A/c xxx
Company
Cash A/c xxx
Shares Capital A/c xxx
Issue of Share Capital
Cash resources
Cash A/c xxx
Share capital A/c xxx

Non-cash resources
Fixed Assets A/c xxx
Share capital A/c xxx
Share Premium
1,700,000
1,000,000
700,000
Bank A/c 1,700,000
Share Capital A/c 1,000,000
Share Premium A/c 700,000

Ledger Account
Share capital
Share premium
Bank
Balance 1,000,000
Bank 700,000
Share capital 1,000,000
Share premium 700,000
Reserves
Reserves are the profits of a company that are retained (not distributed) to its share
holders.


Reserves
Capital Reserves
Revenue Reserves
Those profit which are not
distributed to share holders as
cash dividend
Those profit which are distributed
to share holders as cash
dividend
Reserves
Capital Reserves
Revenue Reserves
1. Share premium
2. Revaluation reserve
3. Capital redemption
reserve
1. Retained profit / Unappropriated
/ Undistributed profit
2. General reserve
3. Any named reserve
a. Stock replacement
b. Plant replacement
Profits
Realized profit
Unrealized profit
1. Share premium
2. Revaluation surplus
Profit after tax
Transferred to
reserve
Paid as dividend
to share holder
Capital redemption
reserve
General
reserve
Plant replacement
reserve
Inventory replacement
reserve
Transfer of Profit to Reserves
(Journal Entry )
Profit & Loss A/c xxx
Reserve (type) A/c xxx
----
Balance sheet
As on 31
st
Dec----
Assets
Non-current Assets
Tangible Fixed assets xxx
Intangible Fixed assets xxx
Long term investments xxx
Long term advances xxx
Deposits xxx
Prepayments xxx
Deferred cost xxx
Total Non-current Assets xxx
Current Assets xxx
xxx



----
Balance sheet
As on 31
st
Dec----
Owners capital
Share capital xxx
Reserves
Capital reserve xxx
Revenue reserve xxx
xxx
Total owners equity xxx
Liabilities
Non current liabilities xxx
Current liabilities xxx
xxx



----
Income Statement
For the year ended 31st Dec----
Sales xxx
Less Cost of goods sold xxx
Gross profit xxx

Less Operating expenses
Administrative expenses xxx
Selling & distribution xxx
xxx
Profit from operations xxx
Add other incomes xxx
Less Financial expenses xxx
Income before tax xxx
Less Income tax xxx
Profit after tax xxx

Statements of Changes in Equity
Opening retained profit xxx
Less Dividend payment xxx
Less transfer to reserves xxx
Closing retained profit xxx