Preparing Financial Statements: Sole Trader Toy Retailer Business

This assignment focuses on the financial accounting practices of a sole trader toy retailer named Conga. It begins with an introduction to financial accounting and its role in business decision-making, followed by the preparation of accounting records and financial statements, including journal entries, ledger accounts, and the creation of key financial reports. The assignment covers various transactions, such as purchases, sales, expenses, returns, payments, and receipts, along with adjustments for depreciation and doubtful debts. It also delves into the application of the prudence and accruals concepts, alongside the recording of Value Added Tax (VAT) in the accounting system. The solution demonstrates a comprehensive understanding of accounting principles and their practical application in a small business context, providing a detailed analysis of the financial performance and position of Conga. The assignment concludes with a summary of the key findings and a discussion of the importance of financial accounting for business management.

Introduction to Financial
Accounting.

Table of Contents
INTRODUCTION...........................................................................................................................3
Overview about company................................................................................................................3
1. Prepare the accounting records and financial statements for a sole trader toy retailer
business........................................................................................................................................3
2. Explain the prudence concept and accruals (matching) concept...........................................14
3. Explain how VAT would be recorded in Conga’s accounting records and reports..............15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
In present business case the concept of financial accounting and management accounting
have helped the internal manager to make meaningful decision in order to increase the overall
efficiency of organisation (Banerjee, 2012). Financial accounting is a one of the specialised part
of accounting that support manager to maintain and hold a systematic record of overall business
firm financial transactions. It provide management of an organisation to follow specific
guidelines and specific manner to record, summaries and present financial data in annual
accounts and reports. Some of common statements are income statements and balance sheet. In
this reports, Conga, has been selected its is a small sole trader toy retailer business.
In this report, various accounting records and financial statements for sole trader
business, prudence and accruals concepts are determined to produce annual reports are discussed.
Apart this importance of value added tax and their application to accounting records and reports
of Conga has been selected.
Overview about company.
Conga, is one of the small sole trader Toy manufacture company, that use to maintain
accounting reports for the first 11 months. Sole trader is a in an individual entrepreneurship that
is a kind of business firm which is owned and managed by an single person and there is no legal
differences between owner and the business firm. It is very important for these kind of
organisation to prepare final account so that actual performance can be analysed and meaningful
decision are made in order to overcome any kind of difference. Trading P&L aid to determine
actual losses and profit for a specific time periods and detail balance sheet is useful to extract
information related to current status of company.
1. Prepare the accounting records and financial statements for a sole trader toy retailer business.
Journal entries: In accounting term, journal entries are defined as the logging of
different happening in an accounting journals that displays a total of company debit and credit
balances (Bevis, 2013.). It is responsibility of internal reporting department to make sure that
balance of both debit side must be equal to credit side. Internal accountant of Conga use to
maintain records by passing number of journals entries for December 2018:
 Credit and cash entries:
5 purchases on credit entries:

S.NO. PARTICULARS DEBIT CREDIT
1 Purchase a/c 20000
To Petter woods a/c 20000
2 Purchase a/c 15000
To John a/c 15000
3 Purchase a/c 10000
To Coco a/c 10000
4 Purchase a/c 40000
To Daniel a/c 40000
5 Purchase a/c 50500
To Donald a/c 50500
3 Expenses paid for in cash
S.NO. PARTICULARS DEBIT CREDIT
1 Rent a/c 5000
Cash a/c 5000
2 Electricity a/c 3000
Cash a/c 3000

3 Wages a/c 51000
Cash a/c 51000
 At least 2 returns outward
S.NO. PARTICULARS DEBIT CREDIT
1 Daniel a/c 12000
To Return outwards a/c 12000
2 Donald a/c 10000
To Return outwards a/c 10000
 At least 2 payments to trade payables
S.NO. PARTICULARS DEBIT CREDIT
1 Accounts payable a/c 20000
To cash a/c 20000
2 Accounts payable a/c 10900
To cash a/c 10900
 At least 5 sales on credit and 3 sales for cash.
S.NO. Particular DEBIT CREDIT
1 Mr Abraham a/c 30000
To sales a/c 30000
2 Mr kawin a/c 20000
To sales a/c 20000
3 Mr kane a/c 50000
To sales a/c 50000
4 Mr dassy a/c 40000
To sales a/c 40000

5 Mr lisa a/c 20000
To sales a/c 20000
S.NO. PARTICULARS DEBIT CREDIT
1 Cash a/c 30000
To Sales a/c 30000
2 Cash a/c 40000
To Sales a/c 40000
3 Cash a/c 10000
To Sales a/c 10000
 At least 2 returns inward
S.NO. PARTICULARS DEBIT CREDIT
1 Return inward a/c 10000
Mr Abraham a/c 10000
2 Return inward a/c 10000
Mr Kawin a/c 10000
 At least 2 receipts from trade receivables
S.NO. PARTICULARS DEBIT CREDIT
1 cash a/c 20000
To account receivables a/c 20000
2 cash a/c 15000
To account receivables a/c 15000
 A discounts allowed and received.
S.NO. PARTICULARS DEBIT CREDIT
1 Cash a/c 27000
Discount allowed a/c 3000

To mr Abraham a/c 30000
2 Mr k a/c 30000
To discount received a/c 3000
To cash a/c 27000
 £3,000 cash spent on electricity and £5,000 spent on rent.
S.NO. PARTICULARS DEBIT CREDIT
1 Electricity a/c 3000
To cash a/c 3000
2 Rent a/c 5000
To cash a/c 5000
 A receipt of £45,000 capital provided by the owner.
S.NO. PARTICULARS DEBIT CREDIT
1 Cash a/c 45000
capital a/c 45000
 The repayment of £20,000 of its loans.
S.NO. PARTICULARS DEBIT CREDIT
1 loan a/c 60000
interest a/c 10000
To bank a/c 70000
 Wages accrued of £4,000
S.NO. PARTICULARS DEBIT CREDIT
1 wages a/c 4000
To wages payable a/c 4000
 Estimated depreciation for the year to 31 December 2018
S.NO. PARTICULARS DEBIT CREDIT
1 depreciation a/c 46000
To accumulated dep. A/c 46000
 Allowance for doubtful debts should be 3% of the year end receivables.
S.NO. PARTICULAR DEBIT CREDIT

S
1 bad debts a/c 3000
To allowance for doubtful
debts a/c 3000
Ledger accounts: General ledger is consider to be a record maintaining system for
business firm financial data with two column credit and debit that is further validated by a trail
balance (Jansson, Jönsson and von Koch, 2012). It is observed that ledger gives a detail records
of each annual fiscal transaction that happens within an organisation during an accounting year.
Manager of sole trader company prepare general ledger to hold and keep account of those
information that is required to formulate annual financial statements and segregate accounts on
their basis such as assets, liabilities, revenues and expenses etc.
Purchase account
Date Particular Dr Date Particulars Cr
2018 2018
01/12/01 To Petter woods a/c 20000 By balance c/d 135500
02/12/01 To John a/c 15000
03/12/01 To Coco a/c 10000
04/12/01 To Daniel a/c 40000
05/12/01 To Donald a/c 50500
135500 135500
sales account
Date Particular Dr Date Particulars Cr
2018 2018
to balance c/d 240000 01/12/02 by Abraham a/c 30000
02/12/02 by kawin a/c 20000
03/12/02 by kane a/c 50000
04/12/02 by dassy a/c 40000
05/12/02 by lisa a/c 20000

06/12/02 by cash a/c 30000
07/12/02 by cash a/c 40000
08/12/02 by cash a/c 10000
240000 240000

Cash a/c
Date Particular Dr Date Particulars Cr
to sales 30000 By rent 5000
to sales 40000 By electricity 3000
to sales 10000 By wages 51000
to receivables a/c 20000 By a/c payables 20000
to receivables
A/c 15000 by a/c payables 10900
to Abraham a/c 27000 by k a/c 27000
to capital 45000
187000 116900
by balance c/d 70100
187000 187000
Return outwards a/c
Date Particular Dr Date Particulars Cr
To balance c/d 20000 By Donald A/c 10000
by Daniel a/c 10000
20000 20000
Return inwards a/c
Date Particular Dr Date Particulars Cr
To Abraham a/c 10000
By balance
c/d 20000
To Kawin a/c 10000
20000 20000
Rent a/c
Date Particular Dr Date Particulars Cr
To cash a/c 5000 By balance c/d 5000

Electricity a/c
Date Particular Dr Date Particulars Cr
To cash a/c 3000 By balance c/d 3000
Wages a/c
Date Particular Dr Date Particulars Cr
to cash a/c 51000
by balance
c/d 97000
to wages
payables a/c 46000
97000 97000
Discount allowed a/c
Date Particular Dr Date Particulars Cr
To Abraham A/c 3000 by balance c/d 3000
Discount received a/c
Date Particular Dr Date Particulars Cr
To balance c/d 3000 By Kawin a/c 3000
Capital a/c
Date Particular Dr Date Particulars Cr
to balance c/d 45000
by a/c
payables 45000
Depreciation a/c
Date Particular Dr Date Particulars Cr

To accumulated dep 46000 By balance c/d 46000
Bad debts a/c
Date Particular Dr Date Particulars Cr
To allowance for
bad debts 3000
By balance
c/d 3000
Accounts receivables
Date Particular Dr Date Particulars Cr
To balance c/d 35000 by cash a/c 20000
by cash a/c 15000
Accounts payables
Date Particular Dr Date Particulars Cr
To cash a/c 20000 By balance c/d 30900
Ty cash a/c 10900
Trail balance: It is a kind of bookkeeping worksheet that shows the balance of all ledger
that are further compiled into credit and debit column that must be equal. Manager use to prepare
trial balance in order to detect any kind of mathematical error that have been occurred in double
entry bookkeeping system (Liu, Yao and Yao, 2012). It is observed in case if the balance of total
debits are equal to total credits that trail balance is considered to be balanced and if it is not than
reason for error are determined. For instance, transactions categorized into improper or those that
are missed by the system could static to be physical accounting errors that would not be detected
by the trial balance procedure.
Trial balance
S no. Ledger a/c Dr Cr
1 capital a/c 45000
2 purchase a/c 135500