# Financial Statements - I, Class 11 Accountancy | SwaVid Financial Statements - I, NCERT Class 11 Accountancy: notes with key ideas, formats, common mistakes and 3 quick checks with worked answers. Canonical: https://www.swavid.com/cbse/class-11/accountancy/chapter/financial-statements-i Source: https://www.swavid.com/cbse/class-11/accountancy/chapter/financial-statements-i # Financial Statements - I ## Definitions, formats and formulas ## Key ideas ## Common mistakes ## Quick checks ## Keep going ## Questions parents ask ## Class 11 Accountancy on SwaVid ### Meaning of financial statements ### Capital versus revenue expenditure ### Capital versus revenue receipts ### Trading account ### Profit and loss account ### Balance sheet and marshalling ### Operating profit ### Next chapter ### Related chapter ### All chapters SwaVid › CBSE › Class 11 › Accountancy › Financial Statements - I Notes written by SwaVid from the NCERT textbook. Class 11 Accountancy, Chapter 8. Key ideas, definitions and common mistakes. CBSE does not print marks for a single chapter. Short answer. This chapter explains the preparation of basic financial statements for a sole proprietorship from a trial balance. Students learn how to distinguish between capital and revenue items to prepare the trading account, profit and loss account, and balance sheet without adjustments. Source: NCERT Accountancy II (Reprint 2026-27) , Chapter 8, Financial Statements - I Financial statements are final reports prepared at the end of an accounting period to ascertain the financial performance and position of an enterprise. They include the income statement, divided into the trading account and profit and loss account, and the balance sheet. Capital expenditure yields benefits over more than one accounting period and results in the acquisition or improvement of an asset. Revenue expenditure is incurred in the normal course of business and its benefit is exhausted within the current accounting year. Capital receipts are non-recurring inflows such as capital contributed by the owner, loans raised, or proceeds from selling fixed assets. Revenue receipts arise from regular business activities such as sales of goods and rendering of services. The trading account is prepared to calculate the gross profit or gross loss arising purely from trading activities. It records net sales, closing stock, opening stock, net purchases, and all direct expenses directly connected with purchase or manufacture. The profit and loss account calculates the net profit or net loss of the accounting period. It starts with gross profit or gross loss transferred from the trading account and accounts for all indirect expenses and indirect incomes. A balance sheet is a statement of assets and liabilities at a particular point in time. Assets and liabilities can be arranged in order of liquidity, where easily convertible assets come first, or in order of permanence, where durable assets come first. Operating profit is the profit earned from the core operations of the business before considering non-operating incomes and expenses. It equals net profit plus non-operating expenses minus non-operating incomes. Try each question first. Then tap it to see the answer. Cost of goods sold = Opening stock + Purchases + Direct expenses - Closing stock Cost of goods sold = 25,000 + 1,40,000 + 6,000 + 14,000 - 30,000 Cost of goods sold = 1,85,000 - 30,000 = 1,55,000 ₹ 1,55,000 Gross profit = Net sales - Cost of goods sold Gross profit = 3,20,000 - 2,45,000 = 75,000 (selling expenses are ignored for gross profit) ₹ 75,000 Operating expenses = Office expenses + Selling expenses = 18,000 + 12,000 = 30,000 Operating profit = Gross profit - Operating expenses Operating profit = 80,000 - 30,000 = 50,000 (loss on sale of furniture is non-operating) ₹ 50,000 Financial Statements - II . Trial Balance and Rectification of Errors . The 9 chapters of Class 11 Accountancy . CBSE does not give marks to one chapter. It prints marks for units or parts, and the chapter list page shows them all. No. They are written by SwaVid from the NCERT textbook. The CBSE curriculum is the reference for what is assessed. Financial Statements - II. SwaVid is an AI tutor for Indian students in Classes 6 to 12. It finds the earlier ideas a child missed, then teaches today’s chapter. Start free to see how it works. - Ch 8 NCERT book - 80 marks, theory paper - 3 quick checks - Treating carriage outwards as a direct expense in the trading account . Carriage inward is incurred on purchases and goes to the trading account, while carriage outward is incurred on sales and must be debited to the profit and loss account. - Adding closing stock to the trading account when it is already given inside the trial balance . If closing stock appears inside the trial balance, it is already adjusted against purchases, so it must be shown only on the assets side of the balance sheet. - Classifying installation costs of machinery as revenue expenditure . Any expense incurred to bring a fixed asset into working condition, such as cartage or installation wages, is a capital expenditure and must be debited to the asset account. - Treating drawings as an expense in the profit and loss account . Drawings represent the withdrawal of capital by the owner for personal use, so it must be deducted from capital on the liabilities side of the balance sheet. ## Key Links - [CBSE](https://www.swavid.com/cbse) - [Class 11](https://www.swavid.com/cbse/class-11) - [Accountancy](https://www.swavid.com/cbse/class-11/accountancy/chapters) - [Start free →](https://www.swavid.com/signup) - [All 9 chapters](https://www.swavid.com/cbse/class-11/accountancy/chapters) - [NCERT Accountancy II (Reprint 2026-27)](https://ncert.nic.in/textbook.php) - [Open notes](https://www.swavid.com/cbse/class-11/accountancy/chapter/financial-statements-ii) - [Open notes](https://www.swavid.com/cbse/class-11/accountancy/chapter/trial-balance-and-rectification-of-errors) - [Class 11 Accountancy](https://www.swavid.com/cbse/class-11/accountancy/chapters) - [Start free →](https://www.swavid.com/signup)