Final Accounts Of A Sole Trader Finance Essay

A exclusive bargainer is non merely the exclusive proprietor of his concern, he is besides its director in the sense that he looks after every facet if his concern activities without any intervention from a 3rd individual. The owner-cum-manager would wish to cognize at the terminal of the accounting period what is the sum of loss incurred in the same period. For this intent, he will fix the income statement or trading and net income and loss history for the twelvemonth. Furthermore, he would besides determine the fiscal place of his concern on the last day of the month of the accounting period by fixing the balance sheet on that day of the month. The concluding histories of exclusive bargainer are non governed by any specific jurisprudence like agenda VI of Companies Act, 1956. Even so, the concluding histories of a exclusive bargainer must be based on good known by and large accepted accounting rules called GAAPs and besides specific accounting criterions.

Debit and recognition balances in the test balance

The debit balances of assorted histories in the test balance represents:

Assetss and deferred gross expenditures histories which are shown in the assests side of the balance sheet.

Losingss and disbursals nominal histories which are transferred to the debit side of a trading or net income and loss history.

The recognition histories balances in the test balance represent:

Capital, liabilities, commissariats and militias histories which are entered in the liabilities side of the balance sheet

Gross and additions nominal histories which are transferred to the recognition side of trading or net income and loss history.

Trading History

Trading history is prepared to cognize whether the house has made gross net income or suffered gross loss. Gross net income or gross border is the extra of net gross revenues gross over cost of goods sold, that is:

Gross net income = net gross revenues gross – cost of goods sold

Where:

Net gross revenues grosss = hard currency gross revenues + recognition gross revenues – gross revenues return

Goods sent on sale or blessing are non portion of gross revenues until blessing is received.

Cost of goods sold = opening stock + cyberspace purchases – stock at the terminal + direct disbursals

Net purchases = hard currency purchases + recognition purchases – purchases returns

Cost of the goods available for sale = opening stock + cyberspace purchases – stock at the terminal

Goods received on consignment footing are ne’er treated as purchases. Similarly, goods received on sale or return footing are ne’er treated as purchases.

Reason: trading history is prepared before the readying of net income and loss history for the undermentioned grounds:

It shows the consequence of trading activities associating to purchases and gross revenues of goods and services.

It enables to compare the place of opening stock with the shutting stock.

It is possible to warrant the value of purchases made and the direct disbursals incurred during the accounting period.

It is possible to do comparative survey of purchases, gross revenues and direct disbursals for different old ages.

It will be possible to cipher different accounting ratios such as gross net income ratio, stock turnover ratio and so on.

It helps in the computation of gross net income so that the direction can happen out the range of absorbing the indirect disbursals.

Trading History

For the twelvemonth stoping — — — — — –

Particulars

Sum

Particulars

Sum

To opening stock

To Purchases aˆ¦..

Less: return aˆ¦ .

To Direct disbursals

aˆ¦

aˆ¦ .

aˆ¦..

By gross revenues aˆ¦aˆ¦

Less: returns aˆ¦aˆ¦

By Closing stock

aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦aˆ¦

Net income AND LOSS ACCOUNT

After the computation of gross net income or gross loss, the net measure is to fix the net income and loss history to find or happen out the sum to find or happen out the sum of net net income of the concern endeavor. Net income and loss history whether prepared individually or along with trading history is an history which shows the net net income or loss of a concern entity for a given or peculiar accounting period. The net net income or net loss is the net income earned or loss suffered after subtracting or adding, as the instance may be, the indirect concern disbursals, viz. : administrative, care, ( fixs and depreciation ) merchandising and distribution, fiscal and assorted disbursals, if any, from the gross net income.

It is the ultimate or concluding net income or loss of a concern house.

Net income AND LOSS ACCOUNT

For the twelvemonth endedaˆ¦aˆ¦aˆ¦aˆ¦aˆ¦aˆ¦..

Particulars

Sum

Particulars

Sum

To Gross loss b/d

To Wages

To Rent

To Commission

To Ads

To Bad Debts

To Dismiss

To Net net income trans. To capital history

aˆ¦aˆ¦ .

aˆ¦aˆ¦ .

aˆ¦aˆ¦..

aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦aˆ¦ .

aˆ¦aˆ¦ .

aˆ¦aˆ¦ .

aˆ¦aˆ¦aˆ¦

By Gross net income b/d

By loss transferred to capital history

aˆ¦aˆ¦aˆ¦ .

aˆ¦aˆ¦aˆ¦

Fabrication History

A individual may fabricate goods by himself for selling them at a net income. In instance of such a individual, i.e. a maker, it will be necessary to determine the cost of fabricating the goods.

Fabrication History

For the twelvemonth endedaˆ¦aˆ¦..

Particulars

Sum

Particulars

Sum

To work- in- advancement ( opening )

To raw stuff consumed:

Opening stock aˆ¦aˆ¦

Attention deficit disorder: purchase of natural materialsaˆ¦aˆ¦

Less: shutting stock of natural stuffs aˆ¦aˆ¦

To direct or productive rewards

To mill o.h:

Power and fuel

Repair of workss

Depreciation on works

Factory rent

aˆ¦aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦aˆ¦..

By work-in-progress ( shutting )

By sale of bit

By cost of production of finished goods during the period transferred to the trading history

aˆ¦aˆ¦aˆ¦ .

aˆ¦aˆ¦aˆ¦ .

aˆ¦aˆ¦aˆ¦aˆ¦

BALANCE SHEET

The net income and loss history or trading and net income and loss history shows merely the net net income or loss of a concern endeavor for a given accounting period. But the proprietor or owner ( s ) besides wants to cognize the fiscal place of his concern house on the shutting or last day of the month of the accounting period. Balance sheet has two sides, on the left manus side the liabilities of the concern is shown while on the right manus side the assets of the concern is appeared.

In order of liabilities: The liabilities which are collectible either instantly or in the close hereafter are listed foremost and long term liabilities are listed following.

BALANCE SHEET

As onaˆ¦aˆ¦aˆ¦ .

Liabilitiess

Rs.

Assetss

Rs.

Bank overdrafts

O/S disbursals

Bills collectible

Assorted creditors

Long term loans

Capital

aˆ¦aˆ¦ .

aˆ¦aˆ¦ .

aˆ¦aˆ¦ .

aˆ¦aˆ¦ .

aˆ¦aˆ¦..

aˆ¦aˆ¦aˆ¦ .

Cash in manus

Cash at bank

Prepaid disbursals

Bills receivable

Assorted debitors

Closing stock:

Raw materialsaˆ¦aˆ¦

Work-in-progressaˆ¦..

Finished goodsaˆ¦ .

Furniture

Plant and m/c

Building

Land

good will

aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦..

aˆ¦aˆ¦..

aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦aˆ¦ .

aˆ¦aˆ¦aˆ¦ .

aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦aˆ¦

aˆ¦aˆ¦aˆ¦

In order of public presentation: the liabilities are listed in order of public presentation. The lasting ( capital ) or long term ( unsecured bonds or long term loans ) liabilities are listed first and liabilities collectible shortly are shown following.

BALANCE SHEET

As onaˆ¦aˆ¦

Liabilitiess

Rs.

Assetss

Rs.

Capital

Current history

Capital history

Fixed liabilities

Mortage loans

Fixed sedimentations

Current liabilities

Incomes received in progress

Outstanding disbursals

Assorted creditors

Bills collectible

Bank loan or overdraft

Short term loans

— — — — — — — –

— — — — — — — –

— — — — — — — –

— — — — — — — –

— — — — — — —

— — — — — — —

— — — — — — —

— — — — — — — –

— — — — — — — –

— — — — — — — –

Fixed assets

Good will

Patents

Hallmarks transcript rights

Land and edifices

Plant and machinery

Motor vehicles

Future and adjustments

Loose tools

Long term investings

Current assets

Short-run investings

Accrued income

Prepaid disbursals

Stock in manus

Assorted debitors

Bills receivable

Cash at bank

Cash in manus

— — — — — –

— — — — — –

— — — — — –

— — — — — –

— — — — — –

— — — — — –

— — — — — –

— — — — — –

— — — — — –

— — — — — —

— — — — — –

— — — — — —

— — — — — —

— — — — — —

— — — — — —

— — — — — —

— — — — — —

Question: The followers is the test balance extracted from the books of Akhilesh as on 30 September 2011:

Name of the history

Debit Amount ( Rs. )

Recognition Amount ( Rs. )

Capital History

1,00,000

Plant and Machinery

78,000

Furniture

2,000

Purchases and Gross saless

60,000

1,27,000

Tax returns

1,000

750

Opening stock

30,000

Discount

425

800

Sundry Debtors/ Creditors

45,000

25,000

Wages

7,550

Fabrication rewards

10,000

Passenger car outwards

1,200

Provision for dubious debts

525

Rent, rates and revenue enhancements

10,000

Ads

2,000

Cash

6,900

Entire

2,54,075

2,54,075

Prepare trading and net income and loss history for the twelvemonth ended 30 September 2001 and a balance sheet on that day of the month after taking into history the undermentioned accommodations:

Closing stock was valued at Rs, 34,220.

Provision for dubious debts is to be kept at Rs. 500.

Depreciate works and machinery @ 10 % p.a.

The owner has taken goods deserving Rs. 5,000 for personal usage and to boot distributed goods deserving Rs. 1,000 as samples.

Purchase of furniture Rs. 920 has been passed through purchases book.

Trading History

For the twelvemonth stoping 30 September 2011

Dr. Cr.

Particulars

Sum

Particulars

Sum

TO Opening stock

30,000

By gross revenues

127000

TO purchases

60,000

( – ) gross revenues return

( 1000 )

1,26,000

( – ) Purchases return

750

59250

By shuting stock

34220

( – ) Drawings

( 5000 )

( – ) Free samples

( 1000 )

( – ) furniture purchased

( 920 )

To fabrication rewards

10,000

TO P/L ( GROSS PROFIT )

67890

1,60,220

1,60,220

Net income AND LOSS ACCOUNT

For the twelvemonth stoping 30 september2011

Dr. Cr.

Particulars

Sum

Particulars

Sum

To Discount allowed

425

By Discount received

800

To Wages

7550

By proviso for dubious debts

25

To Carriage Outward

1200

By Gross Net income

67890

To Rent, Rates & A ; revenue enhancement

10,000

To Advertisement

2000

To Depreciation

7800

To free sample

1000

To net net income

38740

68715

68715

BALANCE SHEET

As on 30 September 2011

Liabilities

Sum

Assets

Sum

Capital 1,00,000

Plant and Machinery 78000

( – ) Drawings ( 5000 )

95000

( – ) Depreciation 7800

70,200

( + ) Internet Net income

38740

Furniture 2000

Creditors

25000

( + ) Furniture Purchase 920

2920

Debtors 45000

( – ) Provision for dubious debts 500

44500

Cash

6,900

Closing Stock

34220

1,58,740

1,58,740