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balance brought down. 

One further point is worth noting before we move on to complete this example. You will remember that a 

proprietor's capital comprises any cash introduced by them, plus any profits made by the business, less 

any drawings made by them. At the stage we have now reached, these three elements are contained in 

different ledger accounts. Cash introduced of $7,000 appears in the capital account. Drawings of 

$1,500 appear in drawings. The profit made by the business is represented by the $2,000 credit 

balance on the P/L account.  

It is convenient to gather together all these amounts into one capital account, in the same way as we 

earlier gathered together income and expense accounts into one P/L account. 

If we go ahead and gather the three amounts together, the results are as follows. 

DRAWINGS 

 

$  

$ 

 

Cash at bank 

 

1,500 

 

Capital a/c 

 

1,500 

PROFIT OR LOSS ACCOUNT 

 

$  

$ 

 

Purchases 

 

5,000 

 

Sales 

12,500 

 

Rent 

 

3,500   

 

 

Bank loan interest 

 

100   

 

 

Other expenses 

 

1,900   

 

 

Capital a/c 

 

  2,000

 

 

             

 

 

12,500   

 12,500 

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CHAPTER 6  

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  FROM TRIAL BALANCE TO FINANCIAL STATEMENTS