1. GOING SOLO
UNIT 2C
THE FINAL ACCOUNTS
OF A SOLE TRADER

2. The main aim of the sole trader is to make a profit
2C – THE FINAL ACCOUNTS
TRADING
The main aim of the sole trader is to make a profit
Profit is made by trading stock ie buying and selling
buying stock at a lower price and selling
it at a higher price –
the difference is Gross Profit
We take trading figures from the Trial Balance -
Sales
Sales Returns
Purchases
Purchases Returns
and organise them in a Trading Account to calculate
Gross Profit

3. (This assumes all the goods purchased were sold)
2C – THE FINAL ACCOUNTS
TRADING ACCOUNT
A TRADER
TRADING ACCOUNT FOR YEAR ENDED 31 DECEMBER
£ £
Sales ,400
Less Sales Returns
5,280
Less Cost of Goods Sold:
Purchases 2,800
Less Purchases Returns
Cost of Goods Sold 2,750
GROSS PROFIT 2,530
(This assumes all the goods purchased were sold)

4. Opening Stock Closing Stock
2C – THE FINAL ACCOUNTS
TRADING ACCOUNT
It is normal for businesses to have goods in stock at
the beginning of the year and have stock left unsold
at the end of the year
Goods in stock at the beginning of the year is called:
Opening Stock
Stock unsold at the end of the year is called:
Closing Stock
These need to be included in the Trading Account so
Gross Profit is calculated on goods actually sold.

5. Less Cost of Goods Sold: Opening Stock 500 Add Purchases 2,800
2C – THE FINAL ACCOUNTS
TRADING ACCOUNT
A TRADER
TRADING ACCOUNT FOR YEAR ENDED 31 DECEMBER
£ £ £
Sales ,400
Less Sales Returns
5,280
Less Cost of Goods Sold:
Opening Stock
Add Purchases ,800
Less Purchases Returns ,750
3,250
Less Closing Stock
Cost of Goods Sold ,000
GROSS PROFIT ,280

6. The sole trader must pay all expenses out of Gross Profit
2C – THE FINAL ACCOUNTS
PROFIT AND LOSS ACCOUNT
The sole trader must pay all expenses out of Gross Profit
Gross Profit less Expenses = Net Profit
This is done by listing the expense account balances from the
Trial Balance in the Profit and Loss Account which is tacked
on to the end of the Trading Account after Gross Profit
£ £
GROSS PROFIT ,280
Less Expenses:
Rent
Wages
Insurance
Heating and Lighting ,330
NET PROFIT

7. The Trading and Profit and Loss Account
BALANCE SHEET
2C – THE FINAL ACCOUNTS
The remaining items in the Balance Sheet, and any other
appropriate figures are then entered into the Balance
Sheet.
The Trading and Profit and Loss Account
together with the Balance Sheet
make up the firm’s FINAL ACCOUNTS

8. KEY WORDS Open your key words jotter and copy these down:
2C – THE FINAL ACCOUNTS
Open your key words jotter and copy these down:
Trading Account – where the Gross Profit is calculated
Turnover – Sales less Sales Returns (also called Net Sales)
Cost of Goods Sold – how much the goods sold, cost the
sole trader to buy in
Gross Profit – profit from trading before expenses are paid
Stock – goods not yet sold
Net Profit – profit from trading after expenses are paid
Final Accounts – Trading and Profit and Loss Account and
Balance Sheet