stupid question but need help

celligraphy

Hi guys doing a few basic double entry workout sheets, when doing my t ledgers I cannot understand why some accounts are closed by "statement of profit and loss" and why most will have balance c/f, balance b/f.

SBWife

celligraphy wrote: »

Hi guys doing a few basic double entry workout sheets, when doing my t ledgers I cannot understand why some accounts are closed by "statement of profit and loss" and why most will have balance c/f, balance b/f.

Some are revenue or expense accounts which start each period with a zero balance. Any non zero amounts are taken to the P&L at the end of the period. Others are asset, liability or equity accounts which are amounts on the company balance sheet. Here the opening balance in each period is the same as the closing balance in the previous period.

bonyn

Think of P&L as the amount you earned and expenses you incurred during the year
Think of the balance sheet as the amount of stuff you have at the end of the year.

At the beginning of 2014, you had €5,000 in the bank. and nothing else of value, and no loans..
During 2014, you earned €30,000. Bought a car for €10,000, and paid rent of €6,000.

P&L 2014
Salary €30,000
less rent €6,000
Profit in 2014 €24,000


Balance sheet at 31/12/2014
Car
b/f 0
+ additions €10,000
c/f €10,000

Bank account
b/f €5,000
+ salary €30,000
- rent €6,000
- Car €10,000
c/f €19,000

Total assets €29,000

bottom of balance sheet bit
opening €5,000 (everything you had at the beginning of the year)
plus your Profit for year €24,000
total assets €29,000 (everything you had at the end of the year)