1. FINAL ACCOUNTS

2. FINAL ACCOUNTS
There are a number of stages in putting together an accounting system
Preparing and storing original documents – these are the invoices and statements sent and received between buyer and sellers
Transfer this information onto a computerised accounting system
Prepare financial statements

3. REASONS FOR FINAL ACCOUNTS
Businesses prepare final accounts to show a summary of all trading activities during the year.
Individual records would be too detailed for most people to understand
Final accounts often have to be available for shareholders, potential buyers, creditors, lenders, HMRC

4. TRADING ACCOUNT
This shows the gross profit for the business and is the result of buying at one price and selling at a higher price.

5. D BLOOM TRADING ACCOUNT FOR YEAR ENDING
Sales
Less Cost of Sales
Stock at start
Add purchases
3150
Less stock at end
Cost of sales
GROSS PROFIT

6. Trading Account Task Complete the following trading account for
S Jones for May in your jotter:
Sales
Sales returns
Opening stock 400
Purchases 1890
Purchase returns
Closing stock

7. Financial Terminology – The Trading Account
Sales
Sales returns
Purchases
Purchase returns
Cost of sales
Opening stock
Closing stock

8. Financial Terminology – The Trading Account
Sales – the amount in £s a business sell over the financial year sometimes called turnover.
Sales returns – goods the business has sold that have been returned by customers because they are unsuitable. They must be deducted from the sales figure in the trading account.
Purchases – the amount of stock in £s the business buys from suppliers throughout the financial year.
Purchase returns – the amount of stock in £s the business has bought and returns to the supplier because it is unsuitable. This figure must be deducted from purchases.
Opening stock – the stock in £s the business has at the start of the financial year. This figure would be found by doing a physical stocktake.
Closing stock - the stock in £s the business has at the end of the financial year
Cost of Sales – the cost of the stock that was sold; the figure is deducted from the Sales figure

9. PROFIT AND LOSS ACCOUNT
This account calculates the NET PROFIT
This is the amount left after all expenses have been met, eg phone, rent, etc.
There may also be some income and this is added to the Gross profit figure and then the expenses are deducted.

10. D BLOOM PROFIT AND LOSS ACCOUNT FOR YEAR ENDING
Gross Profit
Less expenses
Telephone
Rent
Wages
Electricity
625
NET PROFIT

11. Profit and Loss Account Task
Complete the following Profit and Loss Account for S Jones in your jotter using the following expenses:
Gross Profit £3,551
Wages £900
Light and heat £120
Rent £125
Telephone £78

12. Finance Terminology – Trading Profit and Loss Account….
Describe the following terms:
Gross Profit –
Trading Account –
Expenses –
Net Profit –
Profit and loss account –

13. Finance Terminology – Trading Profit and Loss Account….
Describe the following terms:
Gross Profit – the profit made from buying and selling throughout the financial year
Trading Account – this account ends with the gross profit. It deducts the cost of sales for the total sales figure
Expenses – wages, telephone rent etc – these are deducted from the gross profit to arrive at the net profit.
Net Profit – the final profit after all expenses are taken into account. This profit is used to declare the amount of tax due to the inland revenue.
Profit and loss account – it ends up at the net profit and shows all the expenses that are deducted from gross profit.

14. The Balance Sheet
This shows the assets and liabilities of an organisation at a particular point in time.
Assets are items or sums of money owned by the business
Liabilities are amounts owed by the business.

15. D BLOOM - BALANCE SHEET as at 31 December 2005
FIXED ASSETS
Premises ,000
Computer equipment 2,000
22,000
CURRENT ASSETS
Stock 1,950
Debtors 3,551
Cash 3,400
8,901
CURRENT LIABILITIES
Creditors 1,586
WORKING CAPITAL 7,315
NET ASSETS ,315
FINANCED BY
Capital at start 27,940
Add Net profit 1, ,315

16. Finance Terminology – The Balance Sheet
Describe the following financial terms:
Fixed Assets
Intangible Assets
Current Assets
Long term Liabilities
Current Liabilities
Working Capital
Debtors
Creditors

17. Finance Terminology – The Balance Sheet
Describe the following financial terms:
Fixed Assets – assets used in the day to day running of the business which will be kept for more than one year eg premises, motor van
Intangible Assets – assets which you cannot see or touch eg reputation (goodwill), brand name.
Current Assets – assets that constantly change and can be easily turned into cash. (stock, debtors and cash)
Long term Liabilities – money the business owes over a long period of time – greater than one year (mortgage, bank loan)
Current Liabilities – money the business owes in the short term – within one year (suppliers, overdraft, tax bill)
Working Capital – current assets minus current liabilities. Working capital in the amount of money a business has available to meet it’s short term debts.
Debtors – individuals and businesses that owe the business money. Debtors are a current asset.
Creditors – individuals and businesses that the business owes money to. Creditors can be current liabilities (suppliers or overdraft) or long term liabilities (bank loan)