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Final Accounts - 2C

The document discusses the final accounts of a sole trader, including how to calculate gross profit using a trading account and the inclusion of opening and closing stock. It also covers calculating net profit by deducting expenses from gross profit in a profit and loss account.

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Saleh Raouf
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33 views8 pages

Final Accounts - 2C

The document discusses the final accounts of a sole trader, including how to calculate gross profit using a trading account and the inclusion of opening and closing stock. It also covers calculating net profit by deducting expenses from gross profit in a profit and loss account.

Uploaded by

Saleh Raouf
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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GOING SOLO

UNIT 2C

THE FINAL ACCOUNTS


OF A SOLE TRADER
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
2C – THE FINAL ACCOUNTS TRADING ACCOUNT

A TRADER
TRADING ACCOUNT FOR YEAR ENDED 31 DECEMBER
£ £
Sales 5,400
Less Sales Returns 120
5,280
Less Cost of Goods Sold:
Purchases 2,800
Less Purchases Returns 50
Cost of Goods Sold 2,750
GROSS PROFIT 2,530

(This assumes all the goods purchased were sold)


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.
2C – THE FINAL ACCOUNTS TRADING ACCOUNT

A TRADER
TRADING ACCOUNT FOR YEAR ENDED 31 DECEMBER
£ £ £
Sales 5,400
Less Sales Returns 120
5,280
Less Cost of Goods Sold:
Opening Stock 500
Add Purchases 2,800
Less Purchases Returns 50 2,750
3,250
Less Closing Stock 250
Cost of Goods Sold 3,000
GROSS PROFIT 2,280
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 2,280
Less Expenses:
Rent 200
Wages 800
Insurance 80
Heating and Lighting 250 1,330
NET PROFIT 950
2C – THE FINAL ACCOUNTS BALANCE SHEET

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


2C – THE FINAL ACCOUNTS KEY WORDS
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

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