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Prepare Final Account For Sole Traders and Partnerships

   

Added on  2020-10-22

19 Pages4543 Words287 Views
PREPARE FINAL ACCOUNTFOR SOLE TRADERS ANDPARTNERSHIP

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................11. Evaluating need and process involved in preparation of final accounts......................................11.1 identification of reason for closing off accounts and producing trial balance.................11.2 explanation of process and limitations for preparing set of final accounts from trialbalance....................................................................................................................................21.3 methods which involved in constructing accounts from incomplete records...................21.4 explanation of reasons for imbalances resulting from incorrect double entries...............31.5 description of reasons for incomplete records arising from insufficient data andinconsistencies within data provided......................................................................................32. Preparation of accounting records from incomplete information................................................42.1 calculation of opening and closing capital.......................................................................42.2 Calculation of opening and closing Cash/Bank balances.................................................42.4 calculation of account balances using marks ups and margins........................................53.2 Statement of profit and loss..............................................................................................63.3 Statement of financial position.........................................................................................74. Explanation on legislative and accounting requirements for partnerships..................................84.1 Description of key components of partnership agreement...............................................84.2 Description of key components of partnership accounts..................................................95. Statement of profit and loss appropriation account...................................................................105.1 statement of profit and loss appropriation account.........................................................105.2 determining profit for each partners after all deduction ................................................115.3 capital and current accounts for each partner.................................................................136. Statement of financial potion relating to each partner ..............................................................146.1 and 6.2 calculation of closing balance of each partner and statements of financial position..............................................................................................................................................14CONCLUSION..............................................................................................................................15REFERENCES..............................................................................................................................16

INTRODUCTIONIn order to measure income earned during a financial year and to measure financialposition it is necessary to establish final accounts in both sole trader and partnership business.This assessment will develop to provide effective understanding of key components which usedin preparing final accounts and partnership account in business. Moreover, method ofconstructing accounts from incomplete records and reasons for imbalance resulting in incorrectdouble entries will also be explained in this report.1. Evaluating need and process involved in preparation of final accounts1.1 identification of reason for closing off accounts and producing trial balanceReason behind closing off accounts while preparing final accounts of company is toensure that revenue and expenses account of year will open with zero balance in next financialyear (Xie and et.al., 2018). When financial statements of companies get prepared then onlyclosing entries are recorded. Recording closing entries must require that debit balance recordedin trial balance must have credit balance so that it get write off for next financial year.Trial balance produced by companies in order to find accurateness of mathematical datain books of accounts. If debit balance of trail balance will not get matched at the end then itmeans that there is a big mathematical mistake. Therefore, reason for producing trail balance isas follows-Helpful in finding transposition error- Trial balance helps in finding transpositionerror so that different between total of debit balance will get matched with creditbalance. It is helpful in finding error of commission. For example: written of wrongamount 525 as 552.Helpful in finding Mis-calculation error- this is the type of error which gethappened due to poor calculation power. Trial balance is the tool which helps infinding such types of error by finding difference of total debit balances with creditbalances.Helpful to find Duplication Error- Trail balance helps in finding error whichsometimes recorded two times. Therefore, it will help in reducing such types of errorwhile preparing final accounts.1

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