CBSE Class 11 Accountancy Revision Notes Chapter-9 Financial Statements – I
Financial statements are a crucial aspect of Accounting. These are the statements that present a true and fair view of the financial performance and the financial position of a business. Because these statements have a ton of useful information regarding the performance of a business, these are of interest to many different stakeholders in the business.
In this chapter, students will learn about two major financial statements namely, the profit and loss statement and the balance sheet. Also, many other concepts surrounding these two will be discussed. In order to make it easier for students to prepare this chapter, Extramarks offers CBSE Class 11 Accountancy Revision Notes for Chapter 9 Financial Statements.
These notes explain all the important topics covered in the chapter in a clear and concise form. Before exams, students don’t have the time to go through entire chapters for their revision. This is where Revision Notes by Extramarks will prove really useful to students. These notes can be accessed anytime from the Extramarks’ website.
Revision Notes for CBSE Class 11 Accountancy Chapter-9 – Free Download
Access Class 11 Accountancy Chapter 9 – Financial Statements Part- 1
Whatever students have learned till now in their Accounting curriculum will now be built upon further to summarise a business’s various financial transactions to prepare two main financial statements, namely the profit and loss account and the balance sheet.
Definition:
Financial statements are the collection of reports that summarise an organisation’s business accounts, stating its financial performance, financial position, and cash flows at the end of an accounting year (in case of profit and loss account) and at a particular point in time (in case of the balance sheet).
Objectives of Preparing Financial Statements:
The main objectives of preparing financial statements are:
- To present a true and fair picture of the financial position of the business
- To present a true and fair picture of the financial performance of the business
- To provide detailed information on how the business allocates and uses its resources
- help decision makers and managers make informed decisions about the business
Expenditure:
An expenditure is a payment made for anything that does not fall under the existing liabilities. Expenditure can be classified into the followings:
- Capital expenditure
- Revenue expenditure
Receipts:
The cash inflows that may or may not result in an obligation for payments in the future are called receipts. Receipts are categorised into two types:
- Capital receipts
- Revenue receipts
Trading and Profit and Loss Account:
The trading and profit and loss account is the income statement that portrays the profit earned or the loss experienced at the end of the current accounting year. Profit or loss is the net of revenue and expenditure.
Items Come under Trading and Profit and Loss Account:
Items on the debit side include:
- Opening stock
- Net purchases
- Wages
- Carriage inwards/Freight inwards
- Fuel/Water/Power/Gas
- Packaging materials and packing charge
- Salaries
- Rent paid
- Interest paid
- Commission paid
- Repairs
- Miscellaneous expenses
- Depreciation
- Provision for bad debts
Items on the credit side includes
- Net sales
- Other incomes
- Closing stock
Format of Profit and Loss Account:
The trading and profit and loss account for the ending year:
| Particulars |
Amount |
Particulars |
Amount |
| To Opening Stock
To Purchases
Less: Purchase
Returns
To Wages
To Carriage Inwards
To Gross Profit c/d |
——— |
By Closing Stock
By Sales
Less: Sales
Return |
——– |
| To Salaries
To General Expenses
To Rent
To Carriage Outwards
To Advertising
To Net Profit (transferred to capital account |
——– |
By Gross Profit b/d |
——– |
Gross Profit:
The excess of the net sales going over the net purchases and direct expenses to produce those goods is gross profit. Gross profit is calculated as
Gross Profit= Net Sales – (Net Purchases+Direct Expenses)
Gross loss occurs when the net sales are less than the sum of the net purchases and the direct expenses.
Net Profit:
Net profit occurs when the total of the debit side of the profit and loss account is less than the credit side. Net profit for a period is calculated as
Net Profit= Gross Profit+Other Incomes-Indirect Expenses
Net loss occurs when the debit side exceeds the credit side that depicts the expenses.
Operating Profit (EBIT):
Operating profit occurs when the operating revenue is more than the operating expenses. This profit is earned through the regular operations of a business. Operating profit is calculated as
Operating Profit= Net Profit+Non Operating Expenses-Non Operating Incomes
Balance Sheet:
In financial accounting, a balance sheet is the summary of the financial position of a business at a particular point in time. It includes the assets and liabilities of a company. The assets are on the right side, and the sources used to finance those assets are on the left side of a balance sheet. It helps in finding the accurate financial position of an enterprise.
Items Come Under Balance Sheet:
Items included in a balance sheet are as follows:
- Current Assets
- Current Liabilities
- Fixed Assets
- Intangible Assets
- Investments
- Long-term Liabilities
- Capitals
- Drawings
- Closing Stock
Format of the Balance sheet:
The format of the balance sheet is given below:
| Liabilities |
Amount |
Assets |
Amount |
| Capital
Less: Drawings
Add: Net Profit
Current Liabilities:
Creditors |
——— |
Fixed Assets:
Machinery
Current Assets:
Debtors
Cash
Closing Stock |
——— |
What Are The Items of The Debit Side in Financial Statement Class 11?
There are several items on the debit side of a financial statement. A few of these are given below.
- Wage
- Opening Stock
- Packaging material and charges
- Purchases fewer returns
- Salaries
- Rent paid
- Carriage inwards
- Water, power, fuel, and gas expenses
- Repairs
- Commission paid
- Interest paid
Key Takeaways of the Revision Notes and a Few Suggestions for the Students
The CBSE Class 11 Accountancy Chapter 9 notes have been formulated by subject matter experts for the students’ reference. These revision notes are a perfect guide for examinations as they present all the important topics in a summarised form. Some essential topics that students should focus on from this chapter include:
- Financial statements: The entire chapter revolves around this, and the students should focus on the two financial statements discussed in the chapter, their purposes, how they are prepared, etc.
- Trading and profit and loss account: The theoretical portion and the illustrations under this section are crucial and should be well understood.
- Relevant items on trading and profit and loss accounts: Students are suggested to look into the items appearing on the debit and credit sides of the account. The sums included in this part are essential for the examination.
Why These Revision Notes?
Revision Notes by Extramarks are a great study partner for students for the following reasons:
- CBSE Revision Notes will assist the students in revising the important portions of the chapter
- Students of Class 11 can refer to the notes right before the exams to get an overview of the chapter rather than reading the whole chapter
- Revision notes contain the formats of trading and profit and loss accounts which the students can refer to comprehend these vital concepts.
- Illustrations and necessary solved sums are also included in the notes, which will help Students gain knowledge and boost their confidence in the subject.
NCERT Solutions Chapter 8 Class 11 Accountancy Revision Notes
Accountancy is a very important subject for commerce students given the importance that it holds in business. A good understanding of this subject will not only help students excel in their studies but also later in their careers. To help students prepare for this subject better, Extramarks offers Revision Notes for all chapters covered in Class 11 Accountancy curriculum. Students can refer to and access these notes from the Extramarks’ website any time