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FSTP Week 1 Session 2
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Sole Trader Accounts Preparation
Aim Understand the need for and the process involved in the preparation for final accounts Produce final accounts for sole traders
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Sole Trader Accounts Preparation
Objectives By the end of the session all learners will be able to : Identify at least 8 accounts that are transferred to the Income Statement and Statement of financial position Using a Statement of Profit and Loss template produce a correct Income Statement (Profit & Loss)
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In pairs discuss and make notes on the following questions (5 minutes)
Activity In pairs discuss and make notes on the following questions (5 minutes) What are the two financial statements? What do they show? Why are financial statements prepared? Who might be interested in them? Discuss & feedback
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Statement of Profit & Loss
Income Statement Statement of comprehensive income
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Statement of Profit & Loss Format (Summarised)
Less Equals Sales Revenue Includes all revenue income Cost of Sales (Cost of Goods Sold) Cost of goods used in the period COGS Gross Profit Expenses (Wages, admin, energy etc) Profit for the year (Net Profit) 8
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Cost of Sales (Cost of goods sold)
P&L Opening Inventory £158,000 Plus Purchases (Less Purchase Returns Plus Carriage Inward) £380,000 - £750 + £1,474 £380,724 Less Closing Inventory £135,000 Equals Cost of Sales £245,724
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Statement of Profit & Loss
Less Equals Sales Revenue Sundry Income Sales Returns Discounts Received Cost of Sales (COGSold) Opening Stock Closing Stock Purchases Purchase Returns Carriage Inwards Gross Profit Expenses Irrecoverable debt Discounts Allowed Carriage Outwards Telephone Stationery Wages Depreciation Net Profit
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Statement of Profit & Loss
Construct an Income Statement using the cards to discover the Gross & Net Profit Students to put each item into a list for a P&L
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Statement of Profit & Loss
Revenue Sales Revenue (Sales Returns) Rental Income Discounts Received £100,000 £9,500 £12,000 £630 Cost of Sales Opening Stock Purchases Carrage Inwards (Purchase Returns) Closing Stock £7,544 £65,000 £750 £1200 £6,500 Gross Profit Expenses Carriage Outward Discounts Allowed Depreciaton Bad Debt W/O Other Expenses £625 £1,250 £685 £143 £24,650 Net Profit Statement of Profit & Loss Students to put each item nto a list for a P&L
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Handout Question 1 Write on slide
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Statement of Financial Position
Trial Balance Income Statement Statement of Financial Position Dr Cr Sales 18462 Purchases 14629 Salaries 2150 Motor expenses 520 Rent and Rates 670 Insurance 111 General Expenses 105 Premises 1500 Motor Vehicles 1200 Sales ledger control a/c 1950 Purchase ledger control a/c 1538 Cash at bank 1654 Cash in hand 40 Drawings 895 Capital 5424 Closing Inventory 1358 Profit / Loss 1635 Totals 25424 19820 8597 Write on slide
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Statement of Financial Position
Trial Balance Income Statement Statement of Financial Position Dr Cr Sales 18462 Purchases 14629 Salaries 2150 Motor expenses 520 Rent and Rates 670 Insurance 111 General Expenses 105 Premises 1500 Motor Vehicles 1200 Sales ledger control a/c 1950 Purchase ledger control a/c 1538 Cash at bank 1654 Cash in hand 40 Drawings 895 Capital 5424 Closing Inventory 1358 Profit / Loss 1635 Totals 25424 19820 8597 Write on slide
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£ Sales Revenue 18462 Opening Inventory Purchases 14,629
Sales Revenue 18462 Opening Inventory Purchases 14,629 Closing Inventory 1,358 Cost of Sales 13,271 Gross Profit 5,191 Less expenses: Salaries 2,150 Motor expenses 520 Rent and Rates 670 Insurance 111 General Expenses 105 3,556 Profit for the year 1,635
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Notes for the Assessment
The Statement of Profit or Loss will be prepared from a given balancing adjusted trial balance. An outline pro-forma will be given, suitable for a sole trader. May require accounts to be combined before completing pro-forma (for example sales and sales returns) in accordance with organisational policies that will be given.
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Notes for the Assessment
May include balances on accounts that are dealt with in ACPR, such as non-current asset disposals, depreciation charges, irrecoverable debts, for example. Understand that trial balance accounts may need translation into the pro-forma names provided (for example, interest paid may need to be shown as finance costs).
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Complete Handout Questions
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Sole Trader Accounts Preparation
Objectives By the end of the session all learners will be able to : Identify at least 8 accounts that are transferred to the Income Statement and Statement of financial position Using a Statement of Profit and Loss template produce a correct Income Statement (Profit & Loss)
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