Multistep Income Statement

For the year ended …………

Particulars Details (Rs.) Total (Rs.)
Sales revenue (Service revenue) xxx
(-) Sales return / Return inward (xxx)
Net Sales / Service revenue xxx
Less: Cost of Goods Sold (COGS)
Opening stock xxx
Purchases xxx
(-) Purchase return / Return Outward (xx)
All Purchase Related and direct factory expenses (ref.1) xxx
(-) Closing Stock (xx) (xxx)
Gross Profit / Gross Loss xxx (xxx)
Less: Operating Expenses:
a) Office and Administrative expenses:
All office and admin related expenses (ref.2) xxx
…………………………………………………………………….. xxx
Total office and admin expenses (a) xxx
b) Selling and Distribution expenses:
All selling and distribution expenses (ref.3) xxx
…………………………………………………………………….. xxx
Total selling and distribution expenses (b) xxx
Total Operating expenses (a+b) (xxx)
Income (loss) from operation xxx (xxx)
Add: Other income and gains:
………………………………………………………………. xxx
………………………………………………………………. (All incomes and gains (ref.4)) xxx xxx
Less: Other expenses and losses:
………………………………………………………………. xxx
………………………………………………………………. (ref.5) xxx (xxx)
Net Profit before tax xxx
Less: Income tax expenses / Provision for tax @....% (xxx)
Net Profit after tax (Profit from continuing operation) xxx
(+/-) Profit (loss) from discontinuing operation xxx (xxx)
Net Profit for the year xxx
Net Profit attributable to:
a. Owner of the company xxx
b. Non-controlling interest xxx
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 Ref. 3: All selling and distribution expenses:
Ref. 1: All Purchase related expenses and
Direct factory expenses a. Rent (Warehouse, showroom, godown)
a. Carriage inward / Carriage on purchase b. Salaries (sales/salesmen)
b. Freight inward / Freight on purchase c. Commission (sales), Insurance (selling)
c. Import duty, Octroi duty d. Carriage outward / Carriage on sales
d. Excise duty, Municipal charges e. Freight outward, Render expenses
e. Clearing charges, Dock charges f. Bad debt, Secondary / labeling Packaging
f. Coolie charge, Cartage
g. Showroom heating & lightning
g. Wages
h. Factory heating, lighting, water h. Printing & Stationery (selling)
i. Factory rent i. Export duty, Haulage outward
j. Coal, gas, fuel, power, motive power j. Advertisement, Advertising expenses
k. Royalty (on production) k. Free samples & gifts, Promotion expenses
l. Consumable stores l. Depreciation on assets (Like: Delivery van,
m. Primary packing
motor, vehicle, automobiles, warehouse)
n. Manufacturing expenses
m. Other selling and distribution expenses, etc.
o. Other direct & factory expenses, etc.
Ref. 4: Other income and gains:
Ref. 2: All office and administrative expenses:
a. Discount received
a. General expenses
b. Rent received / income
b. Salaries expenses (office) c. Commission received / income
c. Rent, rates & taxes d. Interest on investment (Interest received)
d. Insurance, commission (office) e. Compensation received
e. Printing & Stationery, Office supplies
f. Other service revenue / Income from rendering
f. Telephone charge, Telegram, Postage expenses
g. Audit fee, Bank charges services
h. Legal charges g. Bad debt recovered
i. Electricity & water (office) h. Appreciation on fixed assets
j. Trade expenses, director fees i. Dividend received
k. Establishment expenses j. Transfer fee received
l. Entertainment expenses k. Profit / Gain on sale of investment or fixed
m. Depreciation on assets (Like: plant, equipment, assets
machine, computer, furniture, office building) l. Sundry income
n. Intangible assets write off/ amortization m. Miscellaneous income
o. Other office and admin expenses, etc. n. Sale of scrap
o. Apprenticeship premium
Ref. 5: Other Expenses and Losses: p. Provision for bad debt (old) (i.e. Given in trial
balance credit side)
a. Sundry expenses
q. Other incomes, etc.
b. Miscellaneous expenses
c. Repair and maintenance expenses
d. Research and Development expenses
e. Loss on sale of investment/ fixed assets
f. Interest expenses (Interest on loan/debentures)

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 Statement of Retained Earning
For the year ended …….……
Particulars Details (Rs.) Total (Rs.)
Opening balance of Retained Earning xxx
Add (Less): Net Profit or Net loss for the year xxx (xxx)
Profit available for distribution xxx
Less:
General reserve, Reserve fund (transfer i.e. from additional info)
xx
Proposed Dividend (from additional info)
xx
Dividend paid (any dividend; cash or stock or interim dividend i.e. from Trial)
xx
Income tax paid (last year i.e. from Trial balance) (xxx)
xx
Add: Provision for tax (last year) (only if given in trial balance as last year) xx
Closing balance of Retained Earning xxx

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 Balance Sheet
As on ……….……
Particulars Details (Rs.) Total (Rs.)

ASSETS
1. Current Assets:
Debtors / Account receivable / Bills receivable / Book debt xxx
Consumers / Notes Receivable (short term) xxx
Cash, bank, marketable securities xxx
Closing Stock (ending inventory), Supplies on hand xxx
Accrued income (interest receivable) xxx
Prepaid expenses (advance expenses) xxx
Total Current assets (a) xxx
2. Non-Current Assets:
i. Plant, Property and Equipment (Fixed Assets):
Plant and machinery xxx
Furniture and fixtures xxx
Land and building xxx
Equipment, Vehicle, motor xxx
Delivery van, Computer, Factory premises xxx
Less: Depreciation (in related fixed asset) (xxx)
Add: Appreciation (in related fixed asset) xxx
Total Plant, property and equipment (b) xxx
ii. Investment: xxx
…% investment xxx
Long term investment xxx
Investment in share / debentures / bonds / associates (other company) xxx
Total Investment (c) xxx
iii. Biological Assets:
Livestock (like: Horses, cow, buffaloes, goats, etc.) xxx
Crops, plants, trees, fruits xxx
Total Biological assets (d) xxx
iv. Intangible Assets:
Goodwill, Patents
Copyright, Trademark xxx
Designs, Franchise agreements xxx
Less: Amortization or write off (in related fixed asset if any) (xxx)
Total Intangible assets (e) xxx
Total Assets (a+b+c+d+e) xxx

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 Particulars Details (Rs.) Total (Rs.)

Liabilities and Shareholders’ Equity

1. Current Liabilities and Provision:
Creditors / Account payable / Bills payable / Suppliers xxx
Notes payable (short term) xxx
Outstanding / Payable / Due expenses (e.g. Rent payable, O/S salaries) xxx
Interest payable (Outstanding interest on loan/debentures) xxx
Unearned Income (Income received in advance) xxx
Bank overdraft, short term loans xxx
Provision for tax / Income tax payable xxx
Proposed Dividend xxx
Total current liabilities (a) xxx
2. Non-Current Liabilities (Long term debt):
….% loan, long term loan
….% debentures, bonds xxx
Mortgage loan, bank loan xxx
Notes payable (long term) xxx
Total non-current liabilities (b) xxx
3. Shareholders’ Equity:
Share capital (Equity share capital, Common stock) xxx
Preference share capital (Preferred stock) xxx
Closing retained earnings xxx
Non-controlling interest xxx
General Reserve, Capital Reserve xxx
Dividend equalization fund, Capital Redemption Reserve xxx
Share premium, Sinking fund (All reserves and funds) xxx
Total shareholders’ equity (c) xxx
Total Liabilities and Shareholders’ Equity (a+b+c) xxx

© Kiran Bhatta | Merostudy Academy

 Treatment of Items inside Trial Balance
( एक ठाउँ मा मात्र जान्छ )

1. Closing Stock → Balance Sheet → Current Asset

2. Outstanding Expenses / Due / Accrued Expenses → Balance Sheet → Current Liability

3. Prepaid Expenses → Balance Sheet → Current Asset

4. Unearned Income (Advance Income) → Balance Sheet → Current Liability

(i.e. income received in advance)

5. Accrued Income (Outstanding Income) → Balance Sheet → Current Asset

(i.e. receivable income)

6. Depreciation and intangible assets written off → Income Statement → Office Expenses

7. Bad Debts → Income Statement → Selling Expenses

8. Discount Allowed or Paid / Discount (Dr.) → Income Statement → Selling Expenses

9. Discount Received / Discount (Cr.) → Income Statement → Other Income & gains

10. Dividend Received → Income Statement → Other Income

11. Dividend Paid → (-) in Statement of Retained Earnings

12. Provision for Tax → Balance Sheet → Current Liability

13. Tax Paid:

Case a: If related to last year → Statement of Retained Earnings (-)
Case b: If current year or silent → Income Statement (less after NPBT)
(if there is no provision for tax in additional information; if provision is in additional put
tax paid in statement of retained earnings ( - ))
14. When both Tax Paid and Provision for Tax are given:

• Tax Paid → (−) in Statement of Retained Earnings

• Provision for Tax → (+) in Statement of Retained Earnings

15. General, Capital Reserve, Sinking Fund (any reserve/fund) → Balance Sheet → Equity
(i.e. Reserves & Surplus)

16. Preliminary expenses → Balance Sheet → Asset side

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 Treatment of Items Given in Adjustments
(दु ई ठाउँ मा जान्छ)
a. Closing Stock:
1. Income Statement → (−) in COGS
2. Balance Sheet → Current Asset
b. Outstanding Expenses:
1. Income Statement → (+) with related expenses
2. Balance Sheet → Current Liability
c. Prepaid Expenses:
1. Income Statement → (−) from related expenses
2. Balance Sheet → Current Asset
d. Prepaid Expenses Expired:
1. Income Statement → Office & Admin Expenses (e.g. as prepaid insurance expired)
2. Balance Sheet → (−) from related Prepaid Expenses (in Current Asset)
e. Unearned Income (Advance Income):
1. Income Statement → (−) from related income (in other Income)
2. Balance Sheet → Current Liability
f. Unearned Income Earned:
1. Income Statement → Other Income
2. Balance Sheet → (−) from Unearned / Advance Income (in Current Liability)
g. Accrued Income (Outstanding Income):
1. Income Statement → (+) to related income (in Other Income)
2. Balance Sheet → Current Asset
h. Depreciation:
1. Income Statement → Office & Administrative Expenses
2. Balance Sheet → (−) from concerned Fixed Asset
i. Amortization / Write-off of intangible asset:
1. Income Statement → Office & Administrative Expenses
2. Balance Sheet → (−) from related Asset
j. Appreciation:
1. Income Statement → Other Income
2. Balance Sheet → (+) with concerned Fixed Asset
k. New / Additional Bad Debts / Bad debt written off:
1. Income Statement → Selling Expenses
2. Balance Sheet → (−) from Debtors (in Current Asset)
l. Provision for Bad / Doubtful Debts:
1. Income Statement → Selling Expenses
2. Balance Sheet → (−) from Debtors (after deducting new bad debt (if any) then provision)
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m. Interest on Loan / Debentures:
1. Income Statement → Other Expenses (as interest on loan (outstanding))
2. Balance Sheet → Current Liability (as Interest outstanding/payable on loan)
n. Interest on Investment:
1. Income Statement → Other Income
2. Balance Sheet → Current Asset (as interest receivable / interest accrued)
o. Provision for Tax / Income tax expenses:
1. Income Statement → (−) after Net Profit Before Tax (NPBT)
2. Balance Sheet → Current Liability & Provision
Case: If in additional information
i. Income Tax Expense is Given:
• Effect 1: Income Statement →
Net Profit Before Tax xxx
Less: Income Tax Expense @ … (xx)
Net Profit After Tax xxx
• Effect 2: Balance Sheet →
Current Liabilities: Income Tax Payable xx
ii. Provision for Tax is Given:
• Effect 1: Income Statement →
Net Profit Before Tax xxx
Less: Provision for Tax @ … (xx)
Net Profit After Tax xxx
• Effect 2: Balance Sheet →
Current Liabilities: Provision for Tax xx

p. Proposed Dividend / Provision for Dividend:

1. (−) in Statement of Retained Earnings
2. Balance Sheet → Current Liability & Provision
q. Transfer to General Reserve:
1. (−) in Statement of Retained Earnings
2. Balance Sheet → (+) with general reserve (in Reserves & Surplus i.e. Equity)
Calls in Arrears (Appearing in Trial Balance)
1. Statement of Retained Earnings:
→ Less in statement of R/E but while calculating Proposed Dividend, the dividend rate is applied
on the amount after deducting Calls in Arrears from Share Capital:

Less: Proposed Dividend xxx

(Share Capital amt − Calls in Arrears amt) × Proposed Dividend %
2. Balance Sheet:
→ Shown as a deduction (−) from Share Capital (in liabilities and equity)

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