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Table of Contents
9 FINANCIAL STATEMENTS FOR SOLE TRADERS
SOLE TRADERS..........................................................................4
FINANCIAL STATEMENTS FOR SOLE TRADER................................4
OTHER ITEMS IN FINANCIAL STATEMENTS....................................7
SUMMARY OF YEAR END ADJUSTMENTS FOR FINANCIAL
STATEMENTS...........................................................................11
PREPARING FINANCIAL STATEMENT FROM THE EXTENDED TRIAL
BALANCE.................................................................................12
SOLE TRADERS
A sole trader is a business in which there is only one owner who has
complete control over the business and its management.
The legal ownership structure does not differentiate between the
owner and the business entity (although from an accounting
perspective it does). All the profits, losses, assets and liabilities are
thus the direct responsibility and entitlement of the owner. This
means that any liability of the business is also the responsibility of
the owner (unlike a company).
ADVANTAGES
Ease
of
formation
and
dissolution
Simple to run
Low start-up costs
Low operational overheads
Fewer regulations
Control over the business
operations
Ownership of all profits
DISADVANTAGES
Income Statement
Statement of Financial Position
2,000
10,400
(3,300)
1,000
15,500
Total assets
Current liabilities
Trade payables
Accruals
42,500
25,600
68,100
(9,350)
(12,000)
(21,350)
Non-current liabilities
Bank loan
Total liabilities
(25,500)
(46,850)
Net assets
21,250
69,000
(46,750)
(1,000)
21,250
LIABILITIES
The obligation of paying a debt that a company owes to an external
party is known as liabilities. The external parties are usually the
stakeholders like banks and creditors (also called payables).
Liabilities are usually show up in the form of unpaid bills/invoices or
loans that a company is bound to pay. Classification of liabilities is
as follows:
54,300
1,710
21,840
3,210
43,700
5,180
1,940
4,640
77,510
500
54,600
34,000
8
580
4,740
236,700
60
422,050
4,560
13,200
3,040
24,500
8,100
35,640
INCOME STATEMENT
Income statement for Milton Technologies for the year
ended 31st March 2012
Sales
Less: Cost of sales
Opening Stock
Carriage inwards
Purchases
Less: Closing stock
Gross Profit
Less: Expenses
Telephone
Heat and light
Carriage outwards
Wages
Loan interest
Insurance
Rent
Depreciation-Motor vehicles
Depreciation-Computer equipment
Irrecoverable debts
Allowance for doubtful debt
adjustment
Total expenses
Net Profit
422,050
24,500
1,940
236,700
263,140
(15,800)
247,340
174,710
1,890
3,210
4640
77,510
500
3,920
35,640
12,470
900
500
120
141300
33,410
Fixed Assets
Motor vehicles
43,700
24,870
18,830
Computer equipment
5,180
3,940
1,240
Current Assets
Stock
Debtors
Less allowance for
doubtful debts
Prepayments
Petty cash
Current Liabilities
Bank overdraft
Creditors
Accruals
Current assets
Net Current Assets
(Total assets less
current liabilities)
Long term liability:
Loan
Net assets
Capital
Opening capital
Net profit for the
year
Less drawings
Proprietors funds
48,880
28,810
15,800
53,600
(730)
68,670
590
60
4,740
21,840
7,00
20,070
69,320
(-)
27,280
42,040
62,110
(8,100)
54,010
54600
33,410
88,010
(34,000)
54,010
FINANCIAL STATEMENT
Closing inventory is deducted from purchases
10
Accrued expenses
Prepaid expenses
Accrued income
Prepaid income
Depreciation and
accumulated
depreciation
Disposal of non
current assets
Irrecoverable debts
Creation/increase in
allowance for doubtful
debts
Decrease in allowance
for doubtful debts
Drawings
21,840
54,600
580
4,740
422,050
13,200
3,040
8,100
528,150
Irrecoverable debts are 700 and allowance for doubtful debts are
200
Insurance prepayment is 640 and accrual for telephone expenses
is 180
Depreciation expense for motor vehicles is 11,670 and computer
equipment is 900
Closing inventory is 15,800
12
557,3
70
13
INCOME STATEMENT
Income Statement for Milton Technologies for the year ended 31 st
March 20X8
Sales
Less: Cost of sales
Opening inventory
Carriage inwards
Purchases
Less: Closing inventory
Gross profit
Less: Expenses
Telephone
Heat and light
Carriage outwards
Wages
Loan interest
Insurance
Rent
Depreciation-Motor vehicles
Depreciation-Computer equipment
Irrecoverable debts
Allowance for doubtful debt
adjustment
422,050
24,500
1,940
236,700
263,140
(15,800)
(247,340)
174,710
1,890
3,210
4,640
77,510
500
3,920
35,640
11,670
900
700
200
(140,780)
33,930
Net Profit
14
Non-current Assets
Motor vehicles
Computer equipment
Current Assets
Inventory
Receivables
Prepayments
Petty cash
43,700
5,180
(24,870)
(3,940)
18,830
1,240
48,880
(28,810)
20,070
15,800
52,820
640
60
69,320
Current Liabilities
Bank overdraft
Payables
Accruals
(4,740)
(21,840)
(180)
(26,760)
42,560
(8,100)
54,530
Capital
Opening capital
Net profit for year
Less drawings
Proprietors funds
54,600
33,930
(34,000)
54,530
15