FAF3
Syllabus F. Preparing Basic Financial Statements F2. Statements of profit or loss and other comprehensive income

F2a. Statement of profit or loss 1 / 7

Syllabus F2a)

Prepare a statement of profit or loss and other comprehensive income or extracts as applicable from given information using accounting treatments as stipulated within section D, E and examinable documents.

Income and expenditure T-accounts

The first step in the process of preparing the financial statements is to open up another ledger account, called the statement of profit or loss.

The balances on all the income and expenditure T-accounts are transferred to the statement of profit or loss and the closing inventory adjustment is made.

The statement of profit or loss is part of the double entry system, so the basic rule of double entry still applies: every debit must have an equal and opposite credit entry.