Accounting and Business Studies Review

This assignment reviews various topics in accounting and business studies, including financial reporting, partnership agreements, and the performance of small firms. It also covers the use of IFRS (IAS) 39 for bank financial accounting, the impact of industrial energy efficiency on energy consumption, and the effectiveness of balance training with STARS for patients with chronic ankle instability. The assignment includes a literature review on business start-ups and youth self-employment in the UK, as well as a discussion on measuring improvements in industrial energy efficiency using decomposition analysis applied to the UK.

Prepare final accounts for sole
traders and partnerships

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Identification reason for closing off the accounts and producing a trial balance................1
1.2 Presenting the process and limitation of preparation of final accounts with the help of
trail balance.................................................................................................................................2
1.3 Presenting the methods for account preparation from incomplete records..........................3
1.4 Presenting the reasons of imbalances resulting from incorrect double entry......................3
1.5 Defining the reasons for incomplete records arising from insufficient and inconsistencies
of the data provided.....................................................................................................................4
TASK 2............................................................................................................................................4
2.1 Opening/closing capital of ABC Ltd.....................................................................................4
2.2 Opening/ closing bank account balance ...............................................................................5
2.3 Different ledger accounts of Romelu for year ended 31st December 2020 ........................5
2.4 Accounting balances through markup and margins..............................................................6
TASK 3............................................................................................................................................6
3.1 Describing the components of set of accounts for a sole trade...........................................6
3.2 P&L of sole trader.................................................................................................................6
3.3 Balance sheet of sole trader for year ended 31 December 2020..........................................7
TASK 4............................................................................................................................................8
4.1 Presenting key components of partnership agreement..........................................................8
4.2 Explaining key factors of partnership accountant................................................................9
TASK 5............................................................................................................................................9
5.1 P&L account of partnership .................................................................................................9
5.2 and 5.3 Capital, Current account and Allocation of profits of partners.............................10
TASK 6..........................................................................................................................................11
6.1 and 6.2 Calculation of partner capital account and financial statement...........................11
CONCLUSION..............................................................................................................................12

INTRODUCTION
There are different types of business organization under which business activities are
carried out by the owners of firm. Two of them are sole trader and partnership firm, the former
one is run an operated by a single person rather the latter one is carried out by two or more
individuals. The final accounts reflect the financial position and performance of a business
through various financial statements. The present reports discuss on needs and process related
with preparation of final accounts. Along with his the legislative requirement to be fulfilled for
accounting of partnership firm is also resented. Further diffident types of financial statement and
account are prepared for sole trader and partnership with the given information and data.
TASK 1
1.1 Identification reason for closing off the accounts and producing a trial balance
Reason for Closing off Accounts: The reason for closing of each and every ledger
account is done with a closing entries in each account. This takes place at the end accounting
cycle as a set of trial journal entries. This serve as a purpose of transferring the balances of the
temporary accounts to zero. The process transfers these temporary account balances to
permanent entries on the company's balance sheet. Temporary accounts that close each cycle
include revenue, expense and dividends paid accounts (Bagleyand Abubaker, 2017). The main
purpose served by closing entry is to reconcile the accounts of the company. The closing entries
are also recorded so that the retained earnings account of the organisation display actual rise in
revenues from the previous year and also shows any decreases from dividend payments and
expenses. However, the assets, Liabilities and owner's equity accounts are not closed. These are
permanent accounts and their ending balance act as the beginning balance for the coming
financial year. The main reason being closing of the account is to reconcile the revenues and
expenses in trial balance and to start then ext years accounts with nil balance.
Reason for preparing the Trial balance: This is a statement presenting the closing
balance of ledger account for a specific time period ans this is the first step in the process of
preparation of final statement (Norman, 2017). The trial balances are prepared at the end of
accounting/financial year. The ledger balances are segregated in the debit side rated with assets
and expenses rather the credit side of this statement contains balances of liabilities, capital,
income accounts. The reason for preparation of trial balances is to ensure that every debit entry is
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recorded to a corresponding credit entry has been recorded in the books of account as per the
double entry book keeping accounting system (Burcal, Trier and Wikstrom, 2017). The total of
the trial balance if do not match, an investigation is done to see the reason of difference and same
is resolved before preparation of the final statements. This ensures that there is a chance of error
and omission in the financial statement prepared for an income year.
1.2 Presenting the process and limitation of preparation of final accounts with the help of trail
balance
Preparation of final account with the help of trial balance:
Final accounts are defined as income statement and balance sheet of an organisation with
taking amount and figures form the trial balance year for an income year. The profits and loss
accounts are prepared by taking the revenues and expenses from the trial balances. This
statement is need to be prepared before preparation of balance sheet as the amount of net income
from this account is to be filled in the equity section. The net profits in P&L account shows the
increase or decrease in the values of equity of owner (Ekhasemomhe, 2016). After this the
balance is prepared by taking the amounts of assets and liabilities from the trial balance.
Balances of all assets reflecting on the debit side of trial balance are posted on the asses side and
the credit balances of liabilities are posted n the liability side of the balance sheet. This given
the total of both side to equate in case the amount do not equals certainly there is a mistake of
something has been left out. The closing balance that is net gain/loss is recorded in balance sheet
to equate the both the sides.
Limitation of this process:
The process of taking the balances form the trial balances includes preparation of income
statement and balance sheet. A minor error or omission in the trial balance reflects directly in
the final accounts of the organisation. In case a transaction is completely missed which was not
even journalised, can effect the final and profit or looses of the firm this can give misleading
final figures about the financial performance of the business (Hinks, Fohrbeck and Meager,
2015). The major drawback the process of preparation of the financial statement from the trial
balances is it need significant level of precision to mitigate the changes of any error or omission
which is not possible practically. The procedures also do not provide substantial means to detect
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any errors that have been occurred and with the same final accounts are prepared which does not
provide a real image of the organisational performances.
1.3 Presenting the methods for account preparation from incomplete records
The accounting records which are not strictly kept in accordance with double entry book
keeping system are referred as incomplete record. This system of keeping the financial records
terms as single entry book keeping (Geddes, 2017). To prepares the financial statements from
incomplete record need precision and a deep insight in order to mitigate chances of error and
omission in the final accounts of a business. The accountants follows a definite procedure to
make accounts from complete record, which is:
Finding out opening capital as this helps in determining the closing capital after this
preparation of cash book is done which reflect all purchases and sales on case and credit, actual
amount of assists and more over missing cash payments and cash income. Then credits purchase
is found out which assists in undiscovered the figures of sundry creditors. After this determining
the amount of credit sales is carried out and this aids in figuring out the amount of sundry
debtors. To find closing stock essential step as with this trial balance is prepared (Reninger and
et.al., 2018). The closing balances of sundry assets and debtors are used as current liabilities
and assets in balance sheet.
After this trading and profit and loss account of year is prepared and this defines the actual
amount net profit or loss for an income years. Finally, preparation of balance sheet is done
which reflects actual financial position of the firm.
1.4 Presenting the reasons of imbalances resulting from incorrect double entry
The imbalances in the recording of the financial transaction under double entry books
keeping system may arise in ledgers accounts as well as in the trial balance (Weygandt,, Kimmel
and Kieso, 2015). The various reasons for the non matching the both side of account are
referred as errors and omission in recording transactions these are:
 Errors of omission: A transaction is completely committed to be recorded in both
accounting books.
 Error of commission: A transaction is recorded in wiring account, which results in non
balancing of the actual account as the real figurers is committed to record in that specific
ledger.
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 Errors of principle: This means that a transaction is wrongly posted conceptually and
same have been posted in the corresponding account as per the entry (The Trial Balance
and Errors in the Financial Reporting System, 2018). This gives a total wrong effect in
both accounts, where it is posted and where it needed to be posted.
 Compensatory error: This means a two errors cancel out the effect of each other and the
resultant figures of the particular account balances do not match.
 Error in original entry: The entry have made correctly but while posting in the accounts
wrong amounts are entered which results in imbalance of the accounts or trial balance.
 Reversal of entry: Correct entry have been posted in correct account but at the wrong
side.
1.5 Defining the reasons for incomplete records arising from insufficient and inconsistencies of
the data provided
As defined in the above questions that data and information related with financial
transaction assist in preparation of final accounts of a business. The imbalance occurs the ledger
account and trial balances out of errors and omission on the part of recording but with
incomplete and inconsistent data the recoding can be done with accuracy and precision. With
this the recording of entry and transaction can not be done on time and correctly as the data in
not complete and even not sufficient as well (Khan, 2015). This will directly affect the
perpetration of final accounts as with the income and insufficient data no one event the best of
the accountant can not record the transactions as he/she ware not provided with the full
information related with all business transactions. More with lack of consistence in following
the accounting rules and Principe and recording system in the data a clearly understating can
not be built up which can lead to confusions and ambiguity in preparation of financial statement
of business.
TASK 2
2.1 Opening/closing capital of ABC Ltd
Particulars Amount
Op Bal. 1000
Add: Net Profit 2600
Less: Drawings 600
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Cl. cap 3000
Particulars Amount
Add: Cl. Bal. 4200
Add: Drawings 800
Less: N P 360
Op cap. 4640
2.2 Opening/ closing bank account balance
Revenue Expenses
Date Particulars Ref Cash
balance
Bank
balance Date PArticulars Ref Cash
balance
Bank
balance
01/09/1
9 Bal b/d 10940 10940 02/09/1
9
Bank
(Cheque) 315
02/09/1
9
Cash
(Cheque) 315 06/09/1
9 Rent 135
04/09/1
9 Sales 802
07/09/1
9
Cash
(deposit) 50 07/09/1
9
Bank
(deposit) 50
15/09/1
9 Sales 490 23/09/1
9
Cheque to
S.wills 277
29/09/1
9
Bank
(contra) 120 29/09/1
9 Cash (contra) 120
30 Wages 518
1018 397
Bal c/d 10844 11398
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TOTAL 11862 11795 TOTAL 11862 11795
2.3 Different ledger accounts of Romelu for year ended 31st December 2020
Sales Ledger
Date Particulars Amount Date Particulars Amount
Discount Accepted 1310 Trade payable 16400
Purchase Return 2330 Purchases (Credit) 114800
Supplier (credit
purchase) 109040
Balance c/d 236600
Total 24024 Total 240240
Purchase ledger
Date Particulars Amount Date Particulars Amount
Sales (Cash) 1490 Discount given 3160
Trade receivables 23220 Sales Returns 8150
Credit sales 162540 Bad Debt return off 4770
Cash received 146610 Doubtful debt 660
Balance c/d 317120
Total 333860 Total 333860
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2.4 Accounting balances through markup and margins
Both markup and margins are distinct from each other the markup is the value added in
the cost to sales he product and margin is percentage amount of the profits earned (How to
Calculate Margins and Markups, 2018).
For example: if a product is purchased for $50 and sold at $100 than the good is marked up of
$50 by 100% and the profit margin is 50%.
TASK 3
3.1 Describing the components of set of accounts for a sole trade
A sole trader means a business which is establishes, run operated by a single person. All
the assets and liabilities of business belong to the owners and similarly the firm manager is liable
to comply with all business obligation be it legal or contractual.
final accounts for a sole proprietorship business includes:
 Trading and P&l account: This account reflects the incomes business have earned and
received in an accounting period for sales of goods and services sold/provided (Sole
trader final accounts, 2018). Along with this al the expenses are recoded in this account
as well related with cost of production and overheads such as wages, administrative
selling and distribution cost etc. the difference between incomes and expenses is termed
as net profits or loss.
 Balance sheet: This contains all the figures related with the assets owned by the firm and
the liabilities with the business. The asset has both fixes and current assets such cash,
plant and machinery etc. the abilities have both currents and not current in it such as bank
loans, creditor etc (Storey, end et.al, 2016). Total assets less total liabilities amounts to
capital of the business.
3.2 P&L of sole trader
P&L for the year ended 31 December 2020
Particulars Calculations Amount (£, 00)
Sales receipts 5575
(cost of goods sold)
Opening Stock 500
Purchases 4200
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(Closing Stock) 420 4280
Total GP 1295
Operating overheads
Shop's salary- payment of shop salary 333-2 331
Shop expenses 62
Expenses related with Telephone – accrued
telephone exp 06/01/19 5
Interest Paid 80
Travel expenses 5.5
Discount (Accepted-given) 09/04/05 4.5
Non-current asset's disposed off 2.5
Premise depreciation 150-50 100
Shop's depreciation 144-64 80
Unrecoverable debts 5
doubt full debt-allowance 2.5
adjustment for allowance for doubtful debt 0.5 8
Total operating cost 678.5
Operating Profit 616.5
(VAT) 32.5
Net Profit margin 584
3.3 Balance sheet of sole trader for year ended 31 December 2020
Particulars Details (£),00 Amount (£),00
Assets
Current assets
Stock 4280
Op Stock 500
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Purchase 4200
(closing Stock) 420
sales account book 100 92
(Unrecoverable debt) 5
doubtful debt allowances 2.5
Adjusted doubtful debt 0.5
Bank 26.5
Total CA 4398.5
Fixed assets
Premises 2500
accumulated depreciation 150
depreciation charge 50 2400
Shop fitting expenses 400
(accumulated depreciation ) 144
(depreciation charge) 64 320
Total fixed assets 2720
Total Assets 7118.5
Liabilities
Current liabilities
purchase ledger control 112.5
VAT 32.5
Loan 1300
Total current liabilities 1445
Non-Current liabilities 4079.5
Total Liabilities 5524.5
equity capital 1250
less: drawings 240 1010
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Net profit 584
Total Liabilities and equity 7118.5
TASK 4
4.1 Presenting key components of partnership agreement
The essential elements of partnership agreements are:
 Ownership: This defines the percentage of the firm owned by each partner in the
business.
 Authority: The power and extent up to which each partners can take business decision.
As whether every partner need to sign off every decision so passed or small level of
freedom is given partners to take decision.
 Contribution: the amount that each partners is going to make in the business. This
agreement must address this in detail included which partner is bringing up start up cost
(6 Things Every Partnership Agreement Needs, 2018).
 Workload: Every partner do not work full-time in the firm so the powers rights for
whole time and sleeping partners are decided in this clause.
 Compensation: the agreement must define that what must be paid to each partners for
their contribution in the business work.
 Dispute resolution: this clause is very essential defining how any dispute, if raised
between partners will be solved and what action should be taken in such a situation.
 Death: what happens when a partner dies regarding how the operation and capital
contribution will be handles in case such circumstance occur.
4.2 Explaining key factors of partnership accountant
 Profits and loss accountant reflects the net profit or loss occur to firm after deducting all
the cost ad expenses from the sales revenues and income earned.
 Partnership appropriation account reflate incomes earned by each partners along with the
share in profits of the business, which includes interest on capital detected by interest on
drawings.
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 Goodwill of the firms is calculated in financial terms and is shows on the assets side of
the balance sheet (Mullinova, 2016).
 Current account of partner reflate the total of interest on capital and profits share for
which drawing and interest there on is subtracted.
 Capital account of partner defines the capital left with each partner after the drawing
made by them in a particular accounting year.
 Statement of financial position: this shows the assets owned by the firm and liabilities
owed to the business, presenting financial performance of business.
TASK 5
5.1 P&L account of partnership
Profit and loss Appropriation Account
Particular
Dr amt, in
(£),00 Cr amt in (£),00
Net profits 486.9
Interest on drawing
Veera 6
Ryan 10
Interest on Capital
Veera 60
Ryan 80
Share in the profits 362.9
Veera 145.16
Ryan 217.74
Total 502.9 502.9
Particular
Amount in
(£),00 Total in (£),00
Sales 8125.4 8125.4
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(COGS) 6244.1
Gross profit 1881.3
(Operating Expenses)
Heat and light 32.4
prepaid 110
(Accrued) 10.2 132.2
wages 662.2
Vehicle expenses 74.5
Insurance expenses 14
rates 252
Operating expenses 164
(Accrued) 16
(Prepaid) 12 160
Depreciation on motor vehicles
cost 750
(Accumulated depreciation) 270
Amount for depreciation 480
Depreciation @ 20% 96
Depreciation on fixtures and fittings
Cost 50
(Accumulated depreciation) 15
amount for depreciation calculation 35
Depreciation @ 10 % 3.5
Total operating expenses 1394.4
N P 486.9
5.2 and 5.3 Capital, Current account and Allocation of profits of partners
Capital Account of Ryan
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Date Particular Amount Date Particular Amount
To drawings 32000 By balance b/d 200000
To balance c/d 168000
Total 200000 200000
Current Account of Ryan
Date Particular Amount Date Particular Amount
To balance b/d 1250
By interest on
capital 8000
To drawings 32000
By profit share of
Ryan 21774
To interest on
Drawings 1000
By balance c/d 4476
Capital Account of Veera
Date Particular Amount Date Particular Amount
To drawings 24000 By balance b/d 150000
To balance c/d 126000
Total 150000 Total 150000
Current Account of Veera
Date Particular Amount Date Particular Amount
To drawings 24000 By balance b/d 1600
To interest on
drawings 600
By interest on
capital 6000
By profit share of 14516
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Veera
By balance c/d 2484
Total 24600 Total 24600
TASK 6
6.1 and 6.2 Calculation of partner capital account and financial statement
Particulars Amount in (£),00
Fa
Premises 2500
Vehicles 384
Fixtures and fittings 36.5
Total (a) 2920.5
Current assets
Debtors 878
Bank balance 82
Stock 642
Total(b) 1602
Total assets 4522.5
Current liabilities
Creditors 997.3
Total current liabilities 997.3
Net current assets 4522.5
Non current liabilities
Capital accounts
Ryan 1960
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Veera 1500
Current accounts
Ryan 40.36
Veera 24.84
Total non current liabilities 3525.2
Total liabilities 4522.5
Total equities 4522.5
CONCLUSION
With this it can be concluded that for closing of account the year end is essential of
accounting practices and trial balance reflects the closing blackness of all the ledger accounts of
the business, the amount of the trial balances are used in preparation of final statement of firm
which also posses certain limitation as errors and commission can not be detected. Further more
it can be articulated that with both partnership and sole trades are different form each other but
presentation final account a same with small changes as to capital and distribution of the profits
which is clearly reflected in the calculations above in the report.
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