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

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Frequently Asked Questions

What are the final accounts of a sole trader?

The final account of a sole trader is a financial report that shows the full details of their business's Cash Flows and stock during a particular period.

In which type of business do we prepare final accounts?

Final Accounts are prepared in sole proprietorship businesses.

Are the final accounts prepared by a sole trader similar to that of a partnership firm?

The Final Accounts of sole traders are similar to those prepared for Partnership firms except for the sale of goods.

Do sole traders need to prepare financial accounts?

Sole traders are required to prepare financial accounts, but not in detail. These will be bare figures showing the total of assets, liabilities, and capital introduced by the owner. Sole traders are also required to prepare a balance sheet.

What information do I need to prepare a final account?

In order to prepare a final account, you will need to gather the following information: - The balance sheet as of the end of the accounting period - The income statement for the accounting period - Any other relevant notes or disclosures

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