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FINAL ACCOUNTS Class

Notes for ACCT 112

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14 views

FINAL ACCOUNTS Class

Notes for ACCT 112

Uploaded by

Mochimchim003
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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FINAL ACCOUNTS

FINAL ACCOUNTS FOR SOLE TRADERS


(a) TRADING ACCOUNT
The trading account summarises the trading activities (sale and purchase of
goods/stocks) of the business and tries to determine the gross profit for the
relevant financial period. The gross profit is then taken up in the profit and
loss account as part of the income.

Format for the trading account:

Name
Trading Account for the year ended 31 Dec.
₤ ₤ ₤

Sales x
Less: Returns Inwards (x)
x

Less: Cost of Sales


Opening stock x
Purchases x
Add: Carriage Inwards x
x
Less: Returns Outwards x x
Cost of stock available for sale x
Less: Closing stock x (x)
Gross Profit x

Example: 2.1
From the following details draw up the trading account of Springs for the year
ended 31 December 2002, which was his first year in business.

₤
Carriage inwards 6,700
Returns outwards 4,950
Returns inwards 8,900
Sales 387,420
Purchases 333,330
Stock of goods: 31 December 19x7 74,890
Springs
Trading Account for the year ended 31 Dec 2002

£ £

Sales 387,420
Less: Returns Inwards 8,900
378,520

Less cost of sales


Purchases 333,330
Add: Carriage Inwards 6,700
340,030
Less: Returns outwards 4,950
335,080
Less: Closing stock 74,890 260,190
Gross Profit
118,330

Example 2.2
The following details for the year ended 31 March 2003 are available. Draw up the
trading account of R Sings for that year.

£
Stocks: 1 April 2002 16,523
Returns inwards 1,372
Returns outwards 2,896
Purchases 53,397
Carriage inwards 1,122
Sales 94,600
Stocks: 31 March 2003 14323

Answer
R Sings
Trading Account for the year ended 31 Mar 19x8
₤ ₤ ₤
Sales 94,600
Less: Returns Inwards (1,372)
93,228
Less: Cost of sales
Opening Stock 16,523
Purchases 53,397
Add: Carriage Inwards 1,122
54,519
Less: Returns Outwards 2,896 51,623
Cost of goods available for sale 68,146
Less: Closing stock 18,504
(49,642)
Gross Profit 43,586

(b) PROFIT AND LOSS ACCOUNT


It shows the net profit or net loss that the business has made from all the activities
during a financial period.
The net profit (or loss) is determined by deducting all the expenses from all the
incomes of the same financial period.
In practice, the trading account is combined together with the net profit and loss
account into one report so that the format is as shown below:

Name
Trading, Profit and Loss Account for the year ended 31/12/19xx

£ £ £
Sales x
Less: Returns Inwards x
x

Less: Cost of sales


Opening stock x
Purchases x
Add: Carriage Inwards x
x
Less: Returns Outwards x x
Cost of goods available for sale x
Less: Closing stock x (x)
Gross Profit x
Discount received x
Rent received x
Interest received x
Other incomes x
x

Less: Expenses
Carriage Outwards x
Discounts allowed x
Postage & stationary x
Salaries & wages x
Rent paid x
Insurance & rates x
Bank charges x
Other expenses x (x)
Net profit/ (loss) x/(x)
(c) BALANCE SHEET
This is a simple report that shows the assets and liabilities of the business and the
capital of the owner as at a certain point in time. The format is at shown below:

Name
Balance sheet as at 31/Dec/19xx
£ £ £
Non Current Assets
Land & Buildings x
Plant & Machinery x
Fixtures, Furniture & Fittings x
Motor vehicles x
x
Current Assets
Stock/inventories x
Debtors – trade x
Debtors – others x
Cash at bank x
Cash at hand x
x
Current Liabilities
Bank overdraft x
Creditors – trade x
Creditors – others x (x)
Net current assets x
Net Assets x

Capital x
Add: Net profit x
x
Less: Drawings (x)
x

Non Current Liabilities


Loan (s) x
x

The balance Sheet of P Boones in example 2.3 will be produced as follows:


Example 2.3
From the following trial balance of P Boones draw up a trading and profit and loss
account for the year ended 30 September 2002, and a balance sheet as at that
date.
Dr Cr
£ £
Stock 1 October 19x8 23,680
Carriage outwards 2,000
Carriage inwards 3,100
Returns inwards 2,050
Returns outwards 3,220
Purchases 118,740
Sales 186,000
Salaries and wages 38,620
Rent 3,040
Insurance 780
Motor expenses 6,640
Office expenses 2,160
Lighting and heating expenses 1,660
General expenses 3,140
Premises 50,000
Motor vehicles 18,000
Fixtures and fittings 3,500
Debtors 38,960
Creditors 17,310
Cash at bank 4,820
Drawings 12,000
Capital 126,360

332,890 332,890

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