Final Accounts of Sole Proprietorship: Practical Problem and Solution

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on September 13, 2021

Practical Problem

Using the balances extracted from the books of John Enterprises (run by Mr. John), prepare the final accounts (i.e., manufacturing trading and profit and loss account) for the year ended 31 March 2020. Also, prepare a balance sheet as on 31 March 2020.
John Enterprise Balances
Stock on 31 March 2020 is as follows:

$
Raw materials 35,600
Work-in-pr0gress 17,400
Finished goods 96,500
Packing materials 1,250

The following liabilities are to be provided:

(a) Factory power 5,620
(b) Rent and rates 3,860
(c) Lighting and heating 1,600
(d) General expenses:
Factory 250
Office 400
(e) Insurance prepaid 1,700

Provide depreciation @ 10% on plant and 5% on furniture. Increase bad debts provision by $1,000.

Five-sixths of rent and rates, lighting and heating, and insurance are to be allocated to the factory and one-sixth to the office.

Solution

In the Books of John Enterprises
Manufacturing, Trading and Profit and Loss Account
For the year ended 31 March 2020

Final Accounts of Sole Proprietorship Mr John 1
Final Accounts of Sole Proprietorship Mr John 2

Balance Sheet as on March 31, 2020

Final Accounts Balance Sheet Mr John

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

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