Preparing Financial Statement for Sole Trader Flashcards
Whats the double entry for Proprietor withdrawing cash?
Dr Drawings
Cr Cash
What is the double entry for the proprietor taking goods from their business?
Dr Drawings
Cr Purchases
Drawings of goods are recorded at the cost to the business not at their sales value
How does goods drawn affect COGS calculation
Opening inventory + Purchases - Goods drawn (cost price) - Closing inventory
How is Discounts Received and Discounts Allowed recorded in the SPL?
Discounts Received - Other Income
Discounts Allowed - Other expenses
What is the order of the SPL?
Sales Revenue
COGS
Gross Profit
Other Income
Other expenses
Profit
Where is Carriage outwards placed on the P&L?
Other expenses
How is the SFP structured?
NCA’s
Current Assets
Current Liabilities
Net current assets - CA-CL
Non current Liabilities
Net assets - Non Current Assets + Net Current Assets - NCL = Net assets
Financed By:
Opening Capital
+ P&L
- Drawings
Closing Capital
Where does a credit balance on accrurals go from TB?
Credit SFP Liabilites
Where does disposal of non current assets go from TB?
Credit SPL Income
Where does a debit balance on prepayements go from TB?
Debit SFP Asset
Where does Loan Interest go from TB?
Debit SPL Expense
Where does Allowence for DD Adjustment go?
SPL Expense
If there is a doubtful Receivables on the TB what do you have to do?
Minus off Receivables total to net it off
Where does Irrecoverable Debt go from TB?
SPL Expenses
What 4 factors make up the finance by section at the end of the SFP?
Opening Capital
Profit/Loss
Drawings
Closing Capital (should be same value as Net Assets)
When preparing the fnancial statements if given two figures for allowence for doubtful receivables and allowence for doubtful receivables adjustment, how do yo treat these figures?
Allowence for doubtful recievables you net off the total recievables figure
Allowence for doubtful receivables adjustment you add on the P&L as other income
If a sole trader takes from his business £800 worth of goods for personal use, what is the double entry?
Debit - drawings
Credit - Purchases
If the doubtful debt adjustment is a debit how does this chnage the P&L
Doubtful debt adjustment is an expense, usually it will show as a credit which means you’ll need to reduce the expense so therefore add it into income
However if the adjustment is a debit than this will increase the expense and therefore will be added into other expenses section on the P&L
Where does Closing invenotry feature when preparing the SPF and P&L?
P&L opening inventory will feature in COGS
SFP Closing inventory will feature in the current assets section
What does Net Assets equal to?
Closing Capital, useful for opening and closing balances on capital T account questions.
is drawings included in COGS?
No
Example of other income?
Doubtful Receivables adjustment (if its a credit)
Bank interest
Discounts received
