Final Accounts for Sole Traders & Partnerships

FINAL ACCOUNTS FOR
SOLE TRADERS AND
PARTNERSHIPS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Identify the reasons for closing off accounts and producing a trial balance....................1
1.2 The process, and limitations, of preparing a set of final accounts from a trial balance.. .1
1.3 Describe the methods of constructing accounts from incomplete records.......................2
1.4 Provide reasons for imbalances resulting from incorrect double entries.........................3
1.5 Provide reasons for incomplete records arising from insufficient data and inconsistencies
within the data provided.........................................................................................................3
TASK 2............................................................................................................................................3
2.1 Calculate opening and/or closing capital using incomplete information.........................3
2.2 Calculate opening and/or closing cash/account balance using incomplete information. .4
2.3 Prepare sales and purchases ledger control accounts to calculate sales, purchases and bank
figures.....................................................................................................................................4
2.4 Calculation of account balances using mark ups and margins.........................................5
TASK 3............................................................................................................................................6
3.1 Components of final Account...........................................................................................6
3.2 Profit and loss statement of Sole proprietor.....................................................................6
3.3 Balance sheet of the company..........................................................................................8
TASK 4............................................................................................................................................9
4.1 Key components of partnership agreement......................................................................9
4.2 Describe key components of partnership accounts.......................................................10
TASK 5..........................................................................................................................................11
5.1 Preparation of Profit and Loss Appropriation Account:.................................................11
5.2 Allocation of profit to partners after allowing for interest on capital, interest on drawings
and any salary paid to partner(s)..........................................................................................13
5.3 Preparation of capital and current accounts for each partner:........................................13
TASK 6..........................................................................................................................................14
6.1 Calculation of closing balances on each partner's capital and current accounts............14
6.2 Preparation of statement of financial position................................................................15

CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Final accounts prepare at the end of financial year and it shows the financial position of
the sole traders and partnership firm (Bull, 2014). These accounts include such as trading, profit
and loss account and balance sheet. It is prepare with the help of necessary records and
transactions. These statements will provide a base for the sole traders as well as for partners to
build strategies and take decision on the basis of available data. Trading accounts provide gross
profit of the company which is related to the operating activities and it is also called primary
accounts. Profit and loss account will include all the expenses and revenues of the company
which is generated by at the time of selling and distributing products. Balance sheet is the last
final accounts or it is also last process of identifying company's actual position. This report
include all the statements of final accounts in respect of sole traders and partnership firm. It is
also involve the legal requirements of partnership firms and it's components.
TASK 1
1.1 Identify the reasons for closing off accounts and producing a trial balance
For sole traders and partnership it is of utmost importance to close off accounts and
producing trial balance. Ledgers in sole proprietorship are closed at the end of the year so as to
check the balance amount that is available in a particular ledger. A trial balance is a list of all the
balances in the nominal ledger accounts. It helps to check that every ledger in the book is closed
and are matched with a counter entry if required. This helps the sole traders to prove the
arithmetical accuracy for the accounts that they have developed. Also this helps to locate if there
is no accounting errors while recording or at the time of book keeping process.
1.2 The process, and limitations, of preparing a set of final accounts from a trial balance.
The process of preparation of final statements to accounts from trial balance is crucial
task that helps the organisation to know the current position of the business that it operates in.
There are various steps that are followed to prepare final accounts from trial balance which
includes the following:
 First step includes the reading the list of items that are their in trial balance.
 After this for preparing income statement, the accountant has to record all the debit
entries in the trial balance which are of in the nature of expense to the debit side of
income statements and do the same for recording incomes.
1