BHTM- Final Accounts for Sole Trader Finacial Accounting- Topic 5
Topic 5 : Preparation of Final Account for Sole Trader
TRIAL BALANCE
ADJUSTMENTS
INCOME STATEMENT STATEMENT OF
FINANCIAL POSITION
Income Statement (IS)
The Income Statement is one of the most important financial statements and it is a requirement for
correct financial reporting. Its purpose is to show how much profit or loss has been made over a
period of time.
The main purpose is for owners to be able to see how profitably the business is run. Others who will
be interested in the financial results of a business are banks (if the business requires loan) and the
tax authorities.
Statement of Financial Position (SFP)
A SFP is a financial statement setting out the book values of assets, liabilities and capital ‘as at’ a
particular point in time. In simple terms, a SFP shows what a business ‘owns’ and what it ‘owes’ at a
specific time.
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, BHTM- Final Accounts for Sole Trader Finacial Accounting- Topic 5
Format of Statement of Financial Position Format of Income Statement
Rs Rs Rs Rs
ASSETS Sales revenue xxx
Non current assets Less Return Inwards (xxx)
Land and Buildings (cost less Acc Depn) xxx xxx
Plant and Equipment (cost less Acc Depn) xxx Cost of sales:
Fixtures and Fittings (cost less Acc Depn) xxx Opening Inventory xxx
Motor Vehicles (cost less Acc Depn) xxx Add Purchases xxx
xxx Less Return outwards (xxx)
Add Carriage Inwards xxx
Current assets xxx
Inventories (Closing Stock) xxx Less Closing Inventory (xxx)
Accounts receivables (Less Bad debts & Prov for Doubt. Debts) xxx xxx
Prepayments xxx Gross Profit ( If negative then gross loss) xxx
Cash xxx Other income:
xxx Rent received xxx
xxx Interest received xxx
Commission received xxx
CAPITAL AND LIABILITIES Discount received xxx
Capital xxx Profit on sales of NCA xxx
New Capital during the year xxx Bad Debts Recovered xxx xxx
Profit/(Loss) for year xxx xxx
xxx Expenses:
Printing & Stationery xxx
Non current liabilities Rent xxx
8% Loan xxx Postage xxx
Water and Electricity xxx
Current liabilities Telephone xxx
Accruals xxx Wages and salaries xxx
Accounts payable xxx Insurance xxx
Bank overdraft xxx Legal and professional fees xxx
xxx Bad Debts w/o xxx
xxx Increase/ (Decrease) in provision for Doubtful debts xxx
Repairs & Maintenace xxx
Depreciation on various NCA xxx
Carriage Outwards xxx
Advertising xxx
Motor expenses xxx
xxx
Net Profit for the year ( if negative then Net Loss) xxx
In this chapter we will bring together material from the previous chapters and produce a set of
financial statements from a trial balance.
This will involve adjusting for the following items:
• Closing inventory
• Depreciation
• Accruals and prepayments
• Irrecoverable debts and allowance for receivables
Once these adjustments have been made, the Income Statement and SFP can be prepared.
Adjustments
The accounting entries for the adjustments required when preparing the financial
statements:
2
Topic 5 : Preparation of Final Account for Sole Trader
TRIAL BALANCE
ADJUSTMENTS
INCOME STATEMENT STATEMENT OF
FINANCIAL POSITION
Income Statement (IS)
The Income Statement is one of the most important financial statements and it is a requirement for
correct financial reporting. Its purpose is to show how much profit or loss has been made over a
period of time.
The main purpose is for owners to be able to see how profitably the business is run. Others who will
be interested in the financial results of a business are banks (if the business requires loan) and the
tax authorities.
Statement of Financial Position (SFP)
A SFP is a financial statement setting out the book values of assets, liabilities and capital ‘as at’ a
particular point in time. In simple terms, a SFP shows what a business ‘owns’ and what it ‘owes’ at a
specific time.
1
, BHTM- Final Accounts for Sole Trader Finacial Accounting- Topic 5
Format of Statement of Financial Position Format of Income Statement
Rs Rs Rs Rs
ASSETS Sales revenue xxx
Non current assets Less Return Inwards (xxx)
Land and Buildings (cost less Acc Depn) xxx xxx
Plant and Equipment (cost less Acc Depn) xxx Cost of sales:
Fixtures and Fittings (cost less Acc Depn) xxx Opening Inventory xxx
Motor Vehicles (cost less Acc Depn) xxx Add Purchases xxx
xxx Less Return outwards (xxx)
Add Carriage Inwards xxx
Current assets xxx
Inventories (Closing Stock) xxx Less Closing Inventory (xxx)
Accounts receivables (Less Bad debts & Prov for Doubt. Debts) xxx xxx
Prepayments xxx Gross Profit ( If negative then gross loss) xxx
Cash xxx Other income:
xxx Rent received xxx
xxx Interest received xxx
Commission received xxx
CAPITAL AND LIABILITIES Discount received xxx
Capital xxx Profit on sales of NCA xxx
New Capital during the year xxx Bad Debts Recovered xxx xxx
Profit/(Loss) for year xxx xxx
xxx Expenses:
Printing & Stationery xxx
Non current liabilities Rent xxx
8% Loan xxx Postage xxx
Water and Electricity xxx
Current liabilities Telephone xxx
Accruals xxx Wages and salaries xxx
Accounts payable xxx Insurance xxx
Bank overdraft xxx Legal and professional fees xxx
xxx Bad Debts w/o xxx
xxx Increase/ (Decrease) in provision for Doubtful debts xxx
Repairs & Maintenace xxx
Depreciation on various NCA xxx
Carriage Outwards xxx
Advertising xxx
Motor expenses xxx
xxx
Net Profit for the year ( if negative then Net Loss) xxx
In this chapter we will bring together material from the previous chapters and produce a set of
financial statements from a trial balance.
This will involve adjusting for the following items:
• Closing inventory
• Depreciation
• Accruals and prepayments
• Irrecoverable debts and allowance for receivables
Once these adjustments have been made, the Income Statement and SFP can be prepared.
Adjustments
The accounting entries for the adjustments required when preparing the financial
statements:
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