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Part A: Financial statements of business organisations (40 marks): Compare and contrast the financial statements of sole traders and limited liability companies by: (i) explaining

Part A: Financial statements of business organisations (40 marks):

  1. Compare and contrast the financial statements of sole traders and limited liability companies by: (i) explaining features and examples of account items (maximum 10) that are common to both sole traders and limited liability companies, (ii) explaining and illustrating differences in how profits are disbursed/distributed, and (iii) explaining how both types of organisations are financed. These should be presented under subheadings. (10 marks)
  2. Referring to and using the trial balance in appendix A of this brief prepare an income statement and statement of financial position for the named business. (20 marks, 10 for each statement)
  3. Discuss to what extent the financial statements prepared in 2 above will be useful to the business owners and any other stakeholder, for example: supplier, employee, government and management. (10 marks)

    APPENDICES:

    Appendix A: Trial Balance of Godwin Trading Enterprise

    DR

    CR

    Capital

    Salaries & Wages

    Sales

    Opening inventory

    Purchases

    Carriage in

    Purchases returns

    Carriage out

    Rent & Rates

    Motor expenses

    Telephone

    Electricity

    General expenses

    Buildings

    Motor Vehicles at cost

    Fixtures & Fittings

    Trade receivables

    Cash at Bank

    Trade payables

    Sales returns

    Drawings

    23,172

    19,208

    91,244

    1,860

    1,200

    2,292

    2,656

    2,624

    996

    1,884

    50,000

    20,800

    12,100

    23,376

    2,892

    1,230

    7,200

    105,816

    136,600

    1,932

    20,386

    Total

    264,734

    264,734

    Additional information:

  4. Closing inventory 27,700
  5. Electricity charges amounting to 150 had been omitted from the books and remain unpaid.
  6. Management has decided that an amount of 376 of trade receivables cannot be recovered and should be written off from the books completely.

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