Final accounts of a sole trader PDF
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Added on 2021-01-02
Final accounts of a sole trader PDF
Added on 2021-01-02
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Final Accounts For Sole Traders AndPartnerships
Table of ContentsINTRODUCTION...........................................................................................................................4TASK 1............................................................................................................................................41.1 Reasons for closing off and producing trial balance.............................................................41.2 Process and limitation of preparing final accounts:..............................................................51.3 Methods of constructing accounts from incomplete records................................................51.4 Reasons for imbalance resulting from incorrect entries........................................................61.5 Reasons for incomplete records arising from insufficient data.............................................6TASK 2............................................................................................................................................72.1 Calculation of opening and closing capital...........................................................................72.2 Calculation of opening and closing cash/ bank account.......................................................72.3 Preparation of sales and purchase ledger control account....................................................82.4 Mark ups and margins...........................................................................................................9TASK 3............................................................................................................................................93.1 Components of a set of final accounts..................................................................................93.2 Statement of profit and loss.................................................................................................103.3 Statement of financial position............................................................................................10TASK 4..........................................................................................................................................124.1 Key components of partnership agreement.........................................................................124.2 Key components of partnership accounts...........................................................................12TASK 5..........................................................................................................................................135.1Preparation of Profit and Loss Appropriation Account:......................................................135.2 Allocation of profits to the partners....................................................................................145.3 Capital and current account for each partner......................................................................14TASK 6..........................................................................................................................................156.1 Calculation of closing balance of each partner's capital and current account.....................156.2 Statement of financial position............................................................................................15
CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................17
INTRODUCTIONThe final account is part of accounting process. Final account exhibits final result of thecompany for a particular period. Final account refers to financial statement, that includes Profitand loss account or revenue statement and balance sheet. Profit and loss account explainsprofitability level achieved during a particular financial year and balance sheet shows a statementof various assets, liabilities, and shareholder's fund as on a particular date, generally end offinancial year. Final account are used by owners as a basis of taking decisions in order toenhance the performance of business. Whether entity is partnership firm or sole trader, finalaccounts has same importance although some additional accounts are required in case ofpartnership firm (Bain and Band, 2016). In case of final accounts of sole trader, the whole profitis attributable to owner of sole trading firm, but in partnership firm profits are distributed amongpartner according to the agreement of partnership. Calculation of capital distribution inpartnership firm is done through partner's capital and current account which differentiates thefinal account of sole trader and partnership firm. This report exhibits requirement and process ofpreparation of final accounts while considering different aspects of accounting data, legislativeand accounting requirements in the context of sole trader and partnership firm. Final accounts ofsole trader and partnership firm including Statement profit or loss appropriation account havealso been prepared in this report.TASK 11.1 Reasons for closing off and producing trial balanceCompliance of accrual basis system of accounting is the main reason for closing off ofaccounts at the year. Accrual basis requires accounting period to be closed to prevent changesafter closing of books. Under accrual system of accounting, accounts prepared by segregatingdata in certain periods normally accounting period or financial period, and information orfinancial data related to such period is considered and adjustments or closing entries are done tofinalise the accounts (Barrow, Barrow and Brown, 2012).Trial balance is prepared in an entity to check mathematical accuracy while consideringdouble entry system of accounting. Debit side and credit side of trail balance contains closingbalance of all ledger prepared in entity as the case may be. In case total of debit column equal to
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