P4 Preparation of financial accounts for sole trader and limited company

FINANCIAL
ACCOUNTING
PART 1

Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
P1 Preparation of Journal and Ledger accounts.....................................................................3
P2 Preparation of trail balance...............................................................................................7
P3 Preparation of final accounts.............................................................................................7
P4 Preparation of financial accounts for sole trader and limited company............................9
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Financial accounting is the process of preparing financial accounts on annual basis so as
to identify the true and fair financial position of company. Such financial accounts include profit
& loss a/c, Balance sheet, cash flow statement etc. that records the operating performance of
company over a specified period of time. The present assignment includes the preparation of
financial statements of different companies so as to know their financial position in market. In
addition, with this, bank reconciliation is prepared in order to ensure company and bank records
are correct.
PART 1
P1 Preparation of Journal and Ledger accounts
Journal Entries
as on 1 June, 2016
Date Particulars Debit Credit
1 June, 2016 Bank account 65000
To capital account 65000
2 June, 2016 Purchases account 8000
To trade payable account 8000
7 June, 2016 Cash account 4000
To Sales account 4000
8 June, 2018 Trade payable account 4000
To Bank account 4000
14 June, 2018 Prepaid Insurance account 75
To Bank account 75
15 June, 2018 Trade receivable account 12000
To Sales account 12000

16 June, 2018 Purchases account 10000
To trade payable account 10000
18 June, 2018 Equipment account 3000
To Cash account 3000
20 June,2018 Prepaid Rent account 150
To Bank account 150
21 June, 2018 Cash account 10000
To Sales account 10000
25 June, 2018 Cash in hand account 100
To Bank account 100
30 June, 2018 Stationary account 30
To cash in hand account 30
Total 116355 116355
General Ledger accounts
Cash account
Particulars Debit amount Particulars Credit amount
Sales account 4000 Equipment account 3000
Sales account 10000 Stationary account 30
Bank account 100 Balance c/d 11070
Total 14100 Total 14100
Bank account
Particulars Debit amount Particulars Credit amount
Capital account 65000 Account payable account 4000
Prepaid insurance account 75

Prepaid rent account 150
Cash in hand account 100
Balance c/d 60675
Total 65000 Total 65000
Capital account
Particulars Debit amount Particulars Credit amount
Balance c/d 65000 Bank account 65000
Total 65000 Total 65000
Purchases account
Particulars Debit amount Particulars Credit amount
Trade payable account 8000 Balance c/d 18000
Trade payable account 10000
Total 18000 Total 18000
Trade payable account
Particulars Debit amount Particulars Credit amount
Bank account 4000 Purchase account 8000
Balance c/d 14000 Purchase account 10000
Total 18000 Total 18000
Trade receivable account
Particulars Debit amount Particulars Credit amount

Sales account 12000 Balance c/d 12000
Total 12000 Total 12000
Sales account
Particulars Debit amount Particulars Credit amount
Balance c/d 26000 Cash account 4000
Trade receivables account 12000
Cash account 10000
Total 26000 Total 26000
Prepaid Insurance account
Particulars Debit amount Particulars Credit amount
Bank account 75 Balance c/d 75
Total 75 Total 75
Equipment account
Particulars Debit amount Particulars Credit amount
Cash account 3000 Balance c/d 3000
Total 3000 Total 3000
Prepaid Rent account
Particulars Debit amount Particulars Credit amount
Bank account 150 Balance c/d 150
Total 150 Total 150

Stationary account
Particulars Debit amount Particulars Credit amount
Cash account 30 Balance c/d 30
Total 30 Total 30
P2 Preparation of trail balance
Trail Balance
Particulars Debit Credit
Cash account 11070
Bank account 60675
Capital account 65000
Purchases account 18000
Trade payable account 14000
Trade receivable account 12000
Sales account 26000
Equipment account 3000
Prepaid Insurance account 75
Prepaid Rent account 150
Stationary account 30
Total 105000 105000
P3 Preparation of final accounts
Income statement for the year ended 31st December 2017
Revenue: Amount
Sales 125000
less: returns 1500
123500

LESS: COGS 83500
Interest received 1000
Rent received 4850
Gross profit 45850
Expenses:
Rent and rates 1500
postage 900
Insurance 7500
Bad debts 1200
Depreciation 5000
Wages and salaries 13200
To provision for bad debts 934
Less: Bad debts written off 650 284
Outstanding expenses 340
Interest before Interest and taxes 15926
Balance Sheet as at 31st December 2017:
Equities and Liabilities AMOUNT Assets AMOUNT
Capital 120800
Less: Drawings 5150
Creditors
Rent received in advance
Reserves
Suspense account
115650
3900
490
15926
7489
Bank balance
Cash
Debtors
Motor van 25000
less: Acc. Depreciation 5400
Prepaid insurance
Loan given
10594
340
12500
19600
411
100000
143455 143445

P4 Preparation of financial accounts for sole trader and limited company
Income statement of sole trader
Revenue 12/31/2017
Total Revenue 9567000
Cost of Revenue 2222000
Gross Profit 7345000
Operating Expenses
Research Development 1224000
Selling General and
Administrative 3818000
Non Recurring -
Others 38000
Total Operating Expenses -
Operating Income or Loss 2265000
Income from Continuing Operations
Total Other Income/Expenses Net -
Earnings Before Interest and
Taxes 2276000
Interest Expense -
Income Before Tax 2276000
Income Tax Expense 3288000
Minority Interest -
Net Income From Continuing Ops -1012000

Non-recurring Events
Discontinued Operations -4000
Extraordinary Items -
Effect Of Accounting Changes -
Other Items -
Net Income
Net Income -1016000
Preferred Stock And Other
Adjustments -
Net Income Applicable To
Common Shares -1016000
Balance sheet of the sole trader
12/31/2017
Current Assets
Cash And Cash Equivalents 2120000
Short Term Investments 3743000
Net Receivables 695000
Inventory -
Other Current Assets 1185000
Total Current Assets 7743000
Long Term Investments 6331000
Property Plant and Equipment 1597000
Goodwill 4773000
Intangible Assets 69000

Accumulated Amortization -
Other Assets 273000
Deferred Long Term Asset Charges 5195000
Total Assets 25981000
Current Liabilities
Accounts Payable 2641000
Short/Current Long Term Debt 781000
Other Current Liabilities 117000
Total Current Liabilities 3539000
Long Term Debt 9234000
Other Liabilities 1720000
Deferred Long Term Liability
Charges 3425000
Minority Interest -
Negative Goodwill -
Total Liabilities 17918000
Stockholders' Equity
Misc. Stocks Options Warrants -
Redeemable Preferred Stock -
Preferred Stock -
Common Stock 2000
Retained Earnings 13943000
Treasury Stock -21892000
Capital Surplus 15293000
Other Stockholder Equity 717000

Total Stockholder Equity 8063000
Net Tangible Assets 3221000
Income statement of company
Revenue Amount
Total Revenue 39460000
Cost of Revenue 36850000
Gross Profit 2610000
Operating Expenses
Research Development -
Selling General and Administrative 1891000
Non Recurring -
Others -
Total Operating Expenses -
Operating Income or Loss 718000
Income from Continuing Operations
Total Other Income/Expenses Net 26000
Earnings Before Interest and Taxes 761000
Interest Expense 194000
Income Before Tax 567000
Income Tax Expense 139000
Minority Interest -
Net Income From Continuing Ops 445000
Non-recurring Events
Discontinued Operations -

Extraordinary Items -
Effect Of Accounting Changes -
Other Items -
Net Income 428000
Balance sheet of company
Current Assets
Cash And Cash Equivalents 2427000
Short Term Investments 282000
Net Receivables 5691000
Inventory 2510000
Other Current Assets 12000
Total Current Assets 10908000
Long Term Investments 4390000
Property Plant and Equipment 13726000
Goodwill -
Intangible Assets 1487000
Accumulated Amortization -
Other Assets -
Deferred Long Term Asset Charges -
Total Assets 30509000
Current Liabilities
Accounts Payable 13049000