level 3 - Prepare final accounts for sole traders and partnerships - Help please!

AccountsFury5

Hello Everyone,

I just wanted to ask I'm still a little un sure about the statement of financial position (task 1.5), What I wanted to ask so far I've been using sample one on task 1.5, the only thing i understand so far Is the non- current asset, but i usually just look for *something* at cost. but the rest I'm struggling a little with. I do know current asset requires - Trade Receivables but I don't know what figure I'm looking at and same for trade payable. It involves the purchases/sales in some way but I'm not sure what else.


Hopefully someone can share there knowledge with me.

04dbaines

Hello Sorry I cannot relate to the questions/tasks you have specified but I can give you some help/hints/tips. The non current asset at the top of the SFP will require you to deduct the accum depreciation on the cost of the asset. For example Motor Vehicle Cost - Accum depreciation = NBV.

The current asset column will need to be in order of liquidity. Order of liquidity is the presentation of assets in the balance sheet in the order of the amount of time it would usually take to convert them into cash. If you put the inventory at the top and bank cash at the bottom of the current assets the other inbetween you will not have to worry about the order. Other current assets will include prepayments and trade receivables. In the exam you will be given a trial balance which will include the figures required for all of the above.

For current liabilities you will have to include VAT Payables Accruals. Be careful remember if the bank is a credit balance this will mean it is a liability not an asset.

Trade payables and trade receivable figures are given in the trial balance. Do not use any of the P&L figures in the SOFP as this will be incorrect. Sales figures will go at the top of the P&L and purchases will be included in the cost of sales at the top of the P&L also.

Try and label all of the figures that relate to the SOFP and put them all in the correct place on the statement.

Remember current assets minus current liabilities = Net current assets/liabilities if the liabilities outweigh the assets.

Please ask any further questions if I can be of anymore help.

Many Thanks

Dan

welshwizard

Non-current assets should appear as Cost (Debit balance) minus Accumulated depreciation (credit balance) = Carrying value.

Current assets (Debit balances)

The Order of liquidity is VERY. important - to help you get it right think "Sit Down Pretty Aged Black Cat" where:

Sit (Stock = inventory)
Down (Debtor =Trade receivables)
Pretty (Prepayments)
Aged (Accrued income)
Black (Bank)
Cat (Cash)

Trade receivables is the Sales ledger control account figure less any allowance for doubtful debt (a credit balance)

Current liabilities (all credit balances)

Trade payables (Purchase ledger control account)
Accrued expense
Prepaid income
Bank overdraft
VAT Liability (VAT owed to HMRC)

Current assets minus Current liabilities =Net current assets

Non-current liabilities (Credit balances)
Bank loans

Net assets = Non-current assets plus Net-current assets minus Non-current liabilities

Capital section (Financed by)

Capital

Plus
Profit from Statement of profit or loss
Or Minus
Loss from Statement of profit or loss
Less
Drawings

Does this help you?

welshwizard

Of course, the Statement of financial position for partnerships changes slightly in the bottom section (the 'Financed by' section)

Capital Partner A Partner B Partner C Total
Current Partner A Partner B Partner C Total

Remember the Current accounts (just bigger t-accounts) hold:

Debits:
Drawings
Interest on drawings
Share of losses

Credits:
Salaries
Interest on capital
Interest on loans made by partners
Share of profits

AccountsFury5

Thanks so much for sharing all this! I did fail my exam on Wednesday but i will try to resit and revise everything i can. I got exceeded in question 1 and 2 then i fell below 3 and 4 and 5 was a met. so I will just try to revise my weak points.

RosieCarlisle

Good luck for next time! Well done with exceeding in sections 1 and 2 though - section 2 is where most people struggle. I took my Final Accounts exam on Monday and exceeded in all except section 2 (where I 'met') - it's a tricky one!

Donna Curling

thanks for the details welshwizard had never heard of the Sit Down Pretty Aged Black Cat before

JakeR

welshwizard said:

Non-current assets should appear as Cost (Debit balance) minus Accumulated depreciation (credit balance) = Carrying value.

Current assets (Debit balances)

The Order of liquidity is VERY. important - to help you get it right think "Sit Down Pretty Aged Black Cat" where:

Sit (Stock = inventory)
Down (Debtor =Trade receivables)
Pretty (Prepayments)
Aged (Accrued income)
Black (Bank)
Cat (Cash)

Trade receivables is the Sales ledger control account figure less any allowance for doubtful debt (a credit balance)

Current liabilities (all credit balances)

Trade payables (Purchase ledger control account)
Accrued expense
Prepaid income
Bank overdraft
VAT Liability (VAT owed to HMRC)

Current assets minus Current liabilities =Net current assets

Non-current liabilities (Credit balances)
Bank loans

Net assets = Non-current assets plus Net-current assets minus Non-current liabilities

Capital section (Financed by)

Capital

Plus
Profit from Statement of profit or loss
Or Minus
Loss from Statement of profit or loss
Less
Drawings

Does this help you?

That is the best way of remebring that i have heard