GCSE-readyPreparing financial statements from a trial balance
Paper 2 often gives a trial balance and a list of year-end adjustments, and asks for the income statement and statement of financial position. Work through it in a fixed order and every figure has a home.
The trial balance
| Mira Stores: trial balance at 31 December 2025 | Dr £ | Cr £ |
|---|---|---|
| Revenue | 96 000 | |
| Purchases | 52 000 | |
| Inventory at 1 January 2025 | 7000 | |
| Wages | 14 500 | |
| Rent | 6000 | |
| Insurance | 1800 | |
| Electricity | 2100 | |
| Equipment at cost | 30 000 | |
| Accumulated depreciation at 1 January 2025 | 9000 | |
| Trade receivables | 8000 | |
| Provision for irrecoverable debts at 1 January 2025 | 200 | |
| Bank | 3400 | |
| Trade payables | 5600 | |
| Loan (repayable 2030) | 10 000 | |
| Drawings | 12 000 | |
| Capital at 1 January 2025 | 16 000 | |
| Totals | 136 800 | 136 800 |
Each adjustment does two things
Closing inventory £8500: reduces cost of sales; current asset.
Depreciation £3000 (10% of 30 000): expense; accumulated depreciation rises to £12 000.
Electricity owing £300: expense becomes £2400; other payable.
Insurance prepaid £400: expense becomes £1400; other receivable.
Provision 5% of 8000 = £400: the increase of £200 is an expense; receivables are shown at £7600.
Drawings are not an expense: they are taken from capital.
Income statement
| Mira Stores: income statement for the year ended 31 December 2025 | £ | £ |
|---|---|---|
| Revenue | 96 000 | |
| Opening inventory | 7000 | |
| Purchases | 52 000 | |
| Less closing inventory | (8500) | |
| Cost of sales | (50 500) | |
| Gross profit | 45 500 | |
| Wages | 14 500 | |
| Rent | 6000 | |
| Insurance (1800 − 400) | 1400 | |
| Electricity (2100 + 300) | 2400 | |
| Depreciation | 3000 | |
| Increase in provision for irrecoverable debts | 200 | |
| Total expenses | (27 500) | |
| Profit for the year | 18 000 |
Statement of financial position
| Mira Stores: statement of financial position at 31 December 2025 | £ | £ |
|---|---|---|
| Equipment: cost 30 000 less depreciation 12 000 | 18 000 | |
| Inventory | 8500 | |
| Trade receivables (8000 − 400) | 7600 | |
| Other receivables (insurance prepaid) | 400 | |
| Bank | 3400 | |
| Current assets | 19 900 | |
| Total assets | 37 900 | |
| Trade payables | 5600 | |
| Other payables (electricity owing) | 300 | |
| Current liabilities | (5900) | |
| Non-current liability: loan | (10 000) | |
| Net assets | 22 000 | |
| Capital at 1 January | 16 000 | |
| Add profit for the year | 18 000 | |
| Less drawings | (12 000) | |
| Capital at 31 December | 22 000 |
Using Mira Stores, calculate the profit for the year.
- Cost of sales = 7000 + 52 000 − 8500 = £50 500
- Gross profit = 96 000 − 50 500 = £45 500
- Expenses after adjustments = £27 500
- Profit = 45 500 − 27 500 = £18 000
Answer: £18 000
Work through each adjustment twice: once in the income statement and once in the statement of financial position. Accruals are other payables; prepayments are other receivables; depreciation and an increase in the provision are expenses; drawings come off capital.
- Financial statements
- Older name: final accounts
- Trial balance
- A list of ledger balances at a date, used to check that total debits equal total credits.
- Income statement
- Older name: trading and profit and loss account
- Statement of financial position
- Older name: balance sheet
- Other payables
- Older name: accruals
- Other receivables
- Older name: prepayments
All International GCSE Accounting key terms and definitions →
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2 more questions
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Opening inventory £4500, purchases £36 000, closing inventory £6200. What is cost of sales?
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Answer: 34300
£4500 + £36 000 − £6200 = £34 300.
Electricity paid in the year was £3100, and £450 is owing at the year end. What is the electricity expense?
Show the answer
Answer: 3550
£3100 + £450 owing = £3550.
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Checked by the GCSE-ready editorial team, 17 October 2026. Last updated 2 October 2026. Spotted a mistake? Tell us and we will fix it.