Chapter 15: Preparation of Accounts for a Sole Trader

Question 1

Summarise the format of the profit or loss.

Answer 1

1. Sales
2. Cost of good sold
   Opening inventory + purchases - closing inventory
3. Subtotal
   Sales - cost of goods sold = gross profit
4. Sundry income
5. Expenses
6. Subtotal
   Total expenses
7. Total
   Gross profit + sundry income - total expenses = net profit or loss for the year

Question 2

Summarise the format of the statement of financial position.

Answer 2

1. Non-current assets
2. Current assets
   From least to most liquid. Inventory, receivables, prepayments, bank.
3. Subtotal
   Total current assets
4. Current liabilities
5. Subtotal
   Total current liabilities
6. Subtotal
   Current assets - current liabilities = net current assets
7. Total
   Current assets + net current assets = net assets
8. Capital (should be same as net assets)
   Opening capital + profit or loss - drawings = closing capital