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Accounting Notes Principles of Accounting Notes

Sole Trader Final Acounts Notes

Updated Sole Trader Final Acounts Notes

Principles of Accounting Notes

Principles of Accounting

Approximately 45 pages

These notes are prepared by a professional Chartered Certified Accountant and a faculty member in Cambridge Affiliated Institutes.

These note are specially designed for students to easily understand the complex areas of accounting.

According to the original author good grades are reasonably assured....

The following is a more accessible plain text extract of the PDF sample above, taken from our Principles of Accounting Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Standard Format of Income statement of a sole trader:

Mr. Memon

Trading and Profit and loss account

For the Year Ended December 31, 20XX

Sales xxx

Less: Sales return (x)

Net Sales xxx

Less: Cost of goods sold:

Opening inventory xx

Add: purchases xx

Add: carriage in xx

Less: Purchase return (x)

Goods available for sale xx

Less: Closing inventory (x) (xx)

Gross Profit xxx

Less: Overheads / Expenses:

Depreciation xx

Rent xx

Wages and salaries xx

Interest on loan xx

Sundry expenses xx

Insurance xx (xx)

Add: Other Income:

Discount received xx

Rent income xx xx

Net Profit before tax xxx

Less: Taxation (xx)

Net Profit after tax xxx

*** Only those expenses and revenues will go into TPL which belongs to the given accounting period. (Remember Matching/accruals concept)

Standard Format of Balance sheet of a sole trader:

Mr. Memon

Balance sheet as on December 31, 20XX

Noncurrent assets: Cost Accumulated dep. NBV

(000) (000) (000)

Land xx --- xx

Building xx xx xx

Machinery xx xx xx

Motor vehicle xx xx xx

xx xx xx

Current Assets:

Inventory xx

Receivable xx

Less: Provision for bad debt (x) xx

Prepayments xx

Cash/Bank xx xx

Less: Current Liabilities:

Payables xx

Tax liability xx (xx)

Working capital xx

Less: Noncurrent liabilities:

Bank loan (x)

Net Assets xxx

Financed by:

Capital

Opening capital XXX

Add: Profit XX

Less: Drawings (XX)

Closing capital XXX

*** The two boxes should be match with each other, then the balance sheet is said to be balanced.

Mcqs:

  1. Given the following data, calculate the value of the firm’s capital: Non-current assets4,000; inventory 350; accounts receivable 180; cash at bank 650 and accounts payable 280.

  1. 4,900

  2. 5,000

  3. 5,180

  4. 5,460

__________________________________________________________________________________________________________

  1. Which of the following would not be classified as an asset?

  1. Money owed by us to a supplier

  2. Premises

  3. Money owed to us by customers

  4. Cash in hand

__________________________________________________________________________________________________________

  1. The correct double entry to record the return of goods by us to suppliers is:

Debit Credit

  1. Accounts payable Purchases

  2. Accounts payable Returns inwards

  3. Bank Returns outwards

  4. Accounts payable Returns outwards

__________________________________________________________________________________________________________

  1. Which of the following statements is not true?

  1. Paying for assets with cash leaves total assets unchanged in overall value

  2. An increase in liabilities leaves capital and assets both unchanged

  3. Profit adds to capital

  4. Drawings reduces capital

__________________________________________________________________________________________________________

  1. Which of the following is not a liability?

  1. Overdraft

  2. Accounts receivable

  3. Loan

  4. Mortgage

__________________________________________________________________________________________________________

  1. A sole trader introduces a typewriter that is her own into the business for business use. The double-entry transaction needed to record this would be:

Debit Credit

  1. Capital Typewriter

  2. Drawings Typewriter

  3. Typewriter Drawings

  4. Typewriter Capital

__________________________________________________________________________________________________________

  1. Which of the following statements about the trial balance is incorrect?

  1. All errors would be highlighted by the trial balance

  2. Preparation of the final accounts is speeded up

  3. It provides a useful check on the accuracy of the ledger accounts

  4. The totals of each column should agree

__________________________________________________________________________________________________________

  1. Which of the following statements is correct?

  1. Capital must always involve the owner withdrawing money

  2. Cash can be either a credit or debit balance

  3. Drawings reduces the capital balance

  4. Capital is a debit balance

  1. Sale of goods on credit to L Parker should be recorded as:

Debit Credit

  1. Sales L Parker

  2. Sales Profit and loss

  3. L Parker Sales

  4. Profit and loss Sales

__________________________________________________________________________________________________________

  1. Goods purchased on credit by Walsh that are returned to Baker should be entered in the accounts of Baker as:

Debit Credit

  1. Baker Returns outwards

  2. Returns inwards Baker

  3. Returns inwards Walsh

  4. Walsh Returns outwards

__________________________________________________________________________________________________________

  1. What is the closing balance on the following account as at 31 March 1999?

  1. 300 credit

  2. 225 credit

  3. 300 debit

  4. 225 debit

________________________________________________________________________________________________________

  1. The correct heading for the balance sheet of Clayton Ltd drawn up on 31 December 1998 would be:

  1. Balance Sheet for Clayton Ltd for year as on 31 December

  2. Balance sheet as on 31 December 1998

  3. Clayton Ltd, Balance Sheet as on 31 December 1998

  4. Balance sheet for Clayton Ltd as for the year ended 31 December 1998

_______________________________________________________________________________________________________

  1. A furniture retailer buys tables for cash for use in the head office. What entry would record this correctly in the accounts?

Debit Credit

  1. Purchases Cash

  2. Cash Purchases

  3. Office furniture Cash

  4. Cash Office furniture

__________________________________________________________________________________________________________

  1. Buying inventory on credit has the following effect on assets and liabilities:

Effect on assets Effect on liabilities

  1. Decrease inventory No effect

  2. Increase inventory No effect

  3. Decrease inventory Increase accounts payable

  4. Increase inventory Increase accounts payable

...

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