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Page 1

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Unit 2:

Types of Business Organisation:

Sole Traders:

Advantages:

Faster decision making
Independence
Quicker and cheaper to establish
All profits belong to the sole trader
Competitors know less about the business's success as the
accounts don't have to be published

Disadvantages:

Unlimited liability-can lose both business's assets and their own…

Page 2

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Limited liability-owners can only lose what they invest
Can raise large amounts of finance through the selling of shares
Separate legal entity to owners meaning that ownership can changes
Ideas and be shared

Disadvantages:

Complicated to establish-lots of legal requirements
Annual accounts have to be sent to the registrar of…

Page 3

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Opening stock

Purchases

Less closing stock

Gross Profit

Other Income

Less Expenses:

Rent

Wages

Rates

Advertising

Insurance

Motor Expenses

Etc

Net Profit



Sole Trader Balance Sheet

XXX Balance Sheet as at (date)

Fixed Asset

Motor vehicles

Machinery

Current Assets:

Trade Receivables

Bank

Closing stock

Prepayments

Less Current Liabilities:

Page 4

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Trade Payables

Overdraft

Accruals

Less Long-Term Liabilities

Bank Loan

Balancing figure

Represented By:

Capital

+ Profit

-Drawings

Balancing Figure



Adjustments:

Bad Debts Recovered-

This is recorded under `Other Income' as bad debts recovered. This is added
to gross profit.

Income due and received in advance-

Income due is added to…

Page 5

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Provisions for Doubtful Debts-

Used to record the amount written off each year and shows the total
depreciation to date.

Credit provision for depreciation with New Year's amounts

Debit income statement as an expense.

Depreciation-

Purpose-

The reason for recording depreciation is that it would allow the business to
be…

Page 6

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Balance b/f 31st

December 2007-P+L account 5000
5000
Balance c/d
5000
31st

December '08 bal b/f 31st

December 2008 P+L Account
10,000 5,000
Balance c/d
10,000


Disposal of Fixed Assets account-

For Example (using the straight line method)

A Tractor worth £40,000, useful life of 5 years expected to be…

Page 7

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Loss on Sale
5,000
(put on income statement as an
expense)
Note: this is the same for reducing balance, just depreciation is calculated in
the reducing balance way.

Also if a profit was made on the sale, the disposals account would be
debited with `profit on sale' and the amount.…

Page 8

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Limited liability is when the owner can only loose what they have invested
into the business. This means that no owners of the business cannot lose
their personal possessions.

Authorised Capital:

Authorised Capital is how many of each type of share that the business had
been authorised to sell. This…

Page 9

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These reserves arise from the normal trading activities of the business. They
are profits that have been held back from dividend distribution in order to
strengthen the financial position of the company. If the directs do choose to
use them, they can be distributed to the shareholders in the form…

Page 10

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A bank overdraft is a more short-term kind of finance which is also widely
used by start-ups and small businesses. An overdraft is really a loan facility
­ the bank lets the business "owe it money" when the bank balance goes
below zero, in return for charging a high rate…

Comments

Feeba

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this is really gud thanks

Ryan

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Fankyaaaaawwwwwwwww

ithisham

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Thanx was really helpful

Litalesley

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Just what I need. Thanks

Corey Tweedale

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These notes are SIIIIIIIIICCCCCCCKKKKKK

huzaifah

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do you have any notes for unit 3&4? Thanks btw

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