Hello, welcome back to this lecture My name's Justin light from thick numbers. And in this lecture we're going to be producing out p&l and our balance sheet based on our adjusted trial balance for a short bill, automotive case study. So really, at this point, we started with the trial balance, we made our adjustments, and we now have a balanced adjusted trial balance. So really, the next step to actually get a p&l and a balance sheet is pretty straightforward. Actually. We just have to keep continuing to transfer the balances across and determining whether each balance doesn't belong on the p&l or the balance sheet and working through each one until we have every single transaction covered.

So let's work down the list one at a time. And let's just remember About the theory behind each of these accounting equation and how that works, right. So, remember balance sheet is going to cover everything that actually is an asset, a liability, and the owner's equity accounts except for revenue and expenses. So that will be everything which will be the closing balance, which is the position of our balance sheet. Whereas the p&l will be everything that is our revenue or expenses for this particular period that we're measuring, so let's just go through one by one. Now, cash a bank is an asset.

Assets belong on the balance sheet. So we'll put that up there. accounts receivable is also an asset as a debit. So we'll continue to put that on the balance sheet. supplies or inventory is also an asset that will be on our balance sheet. prepaid rent balance is also an asset it belongs on the balance sheet.

The property plant equipment is a non current asset. It belongs on the balance sheet. The cumulative accumulated depreciation is a contra asset and it's a credit balance but still belongs on the balance sheet. The intangibles for $3,000 is a non current asset bones on the balance sheet. The cumulated amortization is a contra asset belongs on the balance sheet. We then move on to the liabilities.

Accounts Payable is a credit balance to liability balance sheet unearned revenue. We actually ended up with zero balance because it came in and out throughout the period. However, it would belong on the balance sheet. If there was a balance. The accrued wages is a liability balance on the balance sheet. The bank loans is a non current liability belongs on the balance sheet.

The share capital is an equity amount, which is the shareholders funds that was put into the business. This is also a credit balance and belongs on the balance sheet. But at this stage at this stage it doesn't balance, but we'll come back to that in just a minute. Let's keep going is continuing with the rest of the transactions. So sales revenue, revenue does not belong on a balance sheet is actually belong in a profit loss statement. And so this credit balance will go to the p&l.

The excess notice for supplies expense is an expense. It belongs on the p&l. Insurance expense. We didn't have any insurance expense but that would belong on the p&l. Wages expense belongs on the pay now. debit balance.

The rent expense belongs on Pay Now The telephone expense is a p&l. The depreciation expense, p&l, mocking expense, p&l, electricity expense, p&l, and the rest of them will be paying out. So we'll just continue to include all of them. Now, at this point, at this point, we can see that we actually got revenues of 19,500. And we've actually got expenses of 23,919 at $914 11. So what that actually means is, we've actually got more expenses than we've got revenues.

For this period of time, we're actually reporting out a debit balance of $4,414 11, which actually means this is actually in a loss position, because we've got more expenses than we do revenues. Now, one thing I just want to point out here is that at this stage, our balance sheet is not balanced. The actual difference here, let's actually work this out is exactly equal to the last position that we have in a p&l, which makes sense because up to this point, everything is balanced, right, the left side and the right side, the debit the credit. So really, what in order to make the balance sheet to balance remember we talked about retained earnings. retained earnings is an opening balance, plus any profits or losses, less any dividends. So in this case, this last position needs to end up eventually in retained earnings in order because if we put this figure in there, you can see that we're going to be balanced right.

However, I'll just talk you through quickly about closing entries, just so you understand the theory behind this and we'll come back to them balancing the scales. So for closing entries, the way this actually works is because the profit and loss statement relates to a particular period of time, you actually need to at the end of that period, Now usually it's at the end of the financial year, you need to transfer all of the revenues and expense accounts as well as dividends into the retained earnings account, but generally it will sit initially through a an account called a p&l summary account. And really all that account is it's it's like a holding account to