AS Accounting Unit 2 Revision Notes

Revision notes on all of the unit content for AS accounting unit 2. 

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  • Created on: 23-05-12 13:10
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Unit 2:
Types of Business Organisation:
Sole Traders:
Faster decision making
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
Unlimited liability-can lose both business's assets and their own
personal possessions.
Capital is limited to the wealth of one individual. May limit
business growth.
Have to work long hours and have poor holidays and rewards
May feel isolated
Ownership cannot be changed
More access to finance as there are more people to contribute
More skills and expertise
Management and responsibilities shared
Workload and ideas can also be shared between partners
Unlimited liability
Profits or debts shared
More difficult decision making as all partners have to agree
Partnerships can be short lived due to death, retirement or
More complicated, expensive and time consuming to set up than
sole traders
Limited Liability companies-both PLC and LTD:

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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
Complicated to establish-lots of legal requirements
Annual accounts have to be sent to the registrar of companies
People who originally establish the company can lose control as
whoever owns 50+%of shares with voting rights controls the
Accounting Concepts (BOGCRAMP):
B usiness Entity-only information relevant to that business must be
recorded.…read more

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Opening stock
Less closing stock
Gross Profit
Other Income
Less Expenses:
Motor Expenses
Net Profit
Sole Trader Balance Sheet
XXX Balance Sheet as at (date)
Fixed Asset
Motor vehicles
Current Assets:
Trade Receivables
Closing stock
Less Current Liabilities:…read more

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Trade Payables
Less Long-Term Liabilities
Bank Loan
Balancing figure
Represented By:
+ Profit
Balancing Figure
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 the relevant income so that the business is able to
keep a track of how much money they are owed. An example of when
income might be due is interest due.…read more

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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.
The reason for recording depreciation is that it would allow the business to
be prudent as the depreciation charge would be deducted from profit. This
means that the loss of value of the fixed asset would be recorded.…read more

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Balance b/f 31st
December 2007-P+L account 5000
Balance c/d
December '08 bal b/f 31st
December 2008 P+L Account
10,000 5,000
Balance c/d
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 resold for
Total loss of value: £20,000
Number of years: 5
Loss per year: £4,000
Provision for Depreciation Account:
Balance b/f Yr1 Income statement
4,000 4,000
Balance c/d
Balance b/f 4,000
8,000 Yr.…read more

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Loss on Sale
(put on income statement as an
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. This would then be included
under other income on the income statement added to Gross profit.…read more

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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 is stated in the memorandum and articles of
Issued Capital:
This shows the actual number of each type of share that the company has
issued to its shareholders.…read more

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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 of cash
dividends.…read more

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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 of interest. As a result, an
overdraft is a flexible source of finance, in the sense that it is only used
when needed.…read more



this is really gud thanks




Thanx was really helpful


Just what I need. Thanks

Corey Tweedale



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

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