Prepare Final Accounts for Sole Traders and Partnerships Assignment
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Added on 2020-10-22
Prepare Final Accounts for Sole Traders and Partnerships Assignment
Added on 2020-10-22
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PREPARE FINAL ACCOUNTSFOR SOLE TRADERS ANDPARTNERSHIPS
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................41. Need and process involved for preparation of final accounts......................................................41.1 Identifying reasons for closing off accounts and generating trial balance............................41.2 Explaining process and limitation of setting final accounts through trial balance...............51.3 Describing methods for constructing accounts from incomplete records.............................61.4 Reasons for imbalances outcome through incorrect double entries......................................61.5 Reasons for incomplete records arise through insufficient data along with inconsistency...72. Accounting records for incomplete records.................................................................................72.1 Calculating closing and opening capital with incomplete information.................................72.2 Calculating closing and opening cash/bank account balance................................................82.3 Preparing sales and purchase ledger control accounts with correct sales, purchase andbank figures.................................................................................................................................82.4 Calculating account balances with application of mark ups and margins.............................93. Final accounts for sole traders.....................................................................................................93.1 Describing components of final accounts for sole trader......................................................93.2 Statement of profit or loss...................................................................................................103.3 Statement of financial position............................................................................................114. Legislative and accounting requirements for partnerships........................................................124.1 Describing key components of partnership agreements......................................................124.2 Describing key components of partnership accounts..........................................................135. Statement of profit or loss appropriation account......................................................................135.1 Preparing statement of profit or loss appropriation account for a partnership....................135.2 Identifying allocation of profit to partners after allowing for interest on capital, interest ondrawings and any salary paid to partner....................................................................................145.3 Preparing capital and current accounts for each partner.....................................................166. Statement of financial position relating to a partnership...........................................................176.1 and 6.2 Calculating closing balance on every partner's current and capital accounts withdrawings and preparing statement of financial position with compliance of partnershipagreement..................................................................................................................................17
CONCLUSION..............................................................................................................................18REFERENCES..............................................................................................................................19
INTRODUCTIONFinal accounts helps in providing actual picture of financial position of any business. Ithelps in reflecting information related to profit and loss created through business or not withinaccounting period. The present report will discuss about need and process engaged for purposeof preparing final accounts. In the same series, it will articulate about accounting records throughincomplete information along with producing accounting records with context of sole traders.There will description on basis of components of final accounts and preparation of both balancesheet along with income statement. This report will be giving appropriate understanding aboutaccounting and legislative requirements for partnerships agreement and accounts as well.Furthermore, it will discuss about preparation of statement of profit and loss appropriationaccount, capital and current account. Lastly, there will statement of financial positions related topartnership with calculation of closing balance.1. Need and process involved for preparation of final accounts1.1 Identifying reasons for closing off accounts and generating trial balanceReason forClosing off accounts: The closing entries of temporary accounts likeexpense and revenue accounts. These closing entries are traced after preparation of financialstatements for particular accounting year. The main reason behind closing entries is for ensuringabout every expense and revenue account should begin with next accounting year with nilbalance (Quinn and Gibney, 2018). The closing entries are traced in such aspect whereorganization's retained earning account reflects actual increase from prior year along withdecrement in payment of dividends and expenses. In this aspect, it has requirement where debtand credit is entered in temporary accounts with presence of debit and credit balancerespectively. The debit amount which is entered should be exactly similar to credit balance as itsobjective is to get zero as account balance.Reason for producing trial balance: Trial balance is formed for purpose of checkingarithmetical accuracy with context of ledger accounts. It lists the ending balance of every ledgeras if total of credit and debit on trial balance does not match then it indicates that sometransactions are recorded in general ledger are not balanced in proper format. In the similaraspect, it helps in locating errors and for purpose of preparing financial statements. Trial balanceis considered as summary of every ledger in specific accounting period as it is very effective toolfor comparison. It is very easy for comparing balances of current year with past period. The data4
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