Final Accounts of Sole Proprietorship form of Business

Module Developed by J.K.Saini, Final Accounts of Sole Proprietorship form of Business1Class XI- Accountancy

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Objectives

Students will be able to prepare final statement of a business - Profit and loss account and Balance Sheet

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The process of Accounting Cycle ends with the preparation of Final Accounts .So Let us begin understanding various steps to compile final accountsAccounting Cycle : JournalLedgerTrial BalanceFinal Accounts3

ProceduresAsk the students what the meaning of Accounting cycle.Divide the class into groups, and have each group meet to brainstorm a list of items which can be incorporated in the final statements. Think of closing entries.Next, have students do research to find closing entries necessary to compile final statements. Handouts on the format of Trading and Profit and loss account and Balance sheet to be shared.Invite students to compare in the intergroup outcome of their research.

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Final Statements of Sole Proprietor comprise of preparing the following statementsTrading and Profit and loss account Balance Sheet

Before we move further, let me elaborate on some of the new terms and their meaning4

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To Opening StockTo PurchasesLess Purchase returnTO Direct expenses

To Gross Profit

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?By Sales ..Less Sales return By Closing StockRs...

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Trading AccountClick here to listen to the sound

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Now Let us move further to the second part of the income statement; i.e Profit and loss AccountTo Indirect Expenses and lossesOffice and Administration Expense Selling and Distribution Expenses Financial ExpensesDepreciation and RepairsAny other loss etc.

To Net Profit

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?By Gross Profit By Income Discount ReceivedCommission receivedInterest Received etc.Rs...

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Profit and Loss Account

Click on the icon to listen ,,

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Examples of Office and Administration Expenses ; Salaries, Rent, stationery, Telephone Charges, legal expense , postage etc

Selling and Distribution Charges : Advertisement, Carriage outwards, Commission, showroom rent, etcFinancial Expenses Bank charges, interest on loan and on capital Depreciation and Repairs on Fixed Assets Other losses like Bad Debts, loss of goods by fire etc. 7

I hope you were able to understand the process of preparing first part of the final statements i.e. Calculating Net Profit/Net Loss

Feedback

Why is a profit and loss account Prepared?Now answer the following question:-8

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Balance sheet is a statement prepared to know the financial position of the business at the end of the year ( that is balances of Assets and Liabilities)Balance Sheet

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Fixed Assets are long term assets which are not for sale in the ordinary course business.

Current Assets are short term assets, which keep changing from one form to another within a short period of 12 months

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Feedback

What are the objectives of Preparing Final Accounts?Why do we prepare a Balalnce Sheet?Now reflect on the following question:-Thank you