Question
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):
- 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)
- 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)
- 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:
- Closing inventory 27,700
- Electricity charges amounting to 150 had been omitted from the books and remain unpaid.
- 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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