Financial

statements of sole
traders
Learning objective
● PREPARE A STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
● PREPARE A STATEMENT OF FINANCIAL
POSITION

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THE STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
This financial statement includes the revenue and
expenses of the business for the financial year,
and therefore the profit or loss. It can be divided
into two clear section.
1. Trading account
2. Other income and all the expenses of the
business for the year

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Trading account
Records the amount of profit earned
from selling the goods the business
“trades” in. It contains two pieces of
accounting information - the revenue
earned from the sales and the cost of
those sales. The difference between
two items is gross profit.

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REVENUE
Revenue
Revenue is the monies
received from selling goods
and services to customers.
Returns inwards (revenue returns)
Return inwards, sometimes also
called revenue returns, are
created when previously sold
goods or services are returned to
the business by customers.
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Cost of sales
Formula to calculate the cost of sales:
Opening inventory + purchases - purchase returns
+ carriage inward - inventory drawings - closing
inventory

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PROFIT AND LOSS SECTION
Gross profit + other revenue - all *expenses

Note: all the expenses must be of a revenue

expenditure

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Changes to profit for the year

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STATEMENT OF FINANCIAL POSITION

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STATEMENT OF FINANCIAL POSITION
Assets Liabilities Capital
1. Non current assets 1. Non current liabilities
The amount put into
Ex: Property, Debt where the amount the business by the
machinery, equipment, due is payable in more owner(s). Capital will
vehicles, goodwill than one year. Ex: long be increased if the
term loans
2. Current assets business has made a
2. Current liabilities profit for the year, and
Trade receivables, decreased if it has
Debt where the amount
bank, cash, other is to be paid within one made a loss for the
receivables, inventory year of the statement of year
financial position date

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ACTIVITY

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ACTIVITY

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Statement of financial position layout (pg.110)

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PREPARING FINANCIAL STATEMENT FROM TRIAL BALANCE
(pg 111)

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Thanks!
Any questions?

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