The following is the procedure for creating an income statement and a balance sheet:
Profit and Loss Statement:
1. Create a trial balance based on the ledger’s various account balances.
2. Subtract the sales return from the total sales to arrive at the income obtained from the company activity.
3. Include non-revenue income (for example, cash discounts and profit from asset sales).
4. To calculate profit before taxes, subtract costs from total revenue.
5. To calculate Net Profit or Loss, subtract the amount determined as profit before tax from the amount determined as profit before tax.
The balance sheet is made up of two parts: equity and liabilities, as well as assets.
1. Shareholder funds, non-current liabilities, current liabilities, and share application money pending allotment are documented in the equity and liabilities section.
2. After that, assets are registered, which includes both non-current and current assets.
3. Add up both sides’ totals. For the total to add up, it must be equal.