Tag: Sole Traders Financial Statements

Alex has a sole trading business with net assets of £286,400 on 13 January 2024.

The business had net assets of £266,800 on 31 January 2023.

During the year Alex did the following:

(1) took goods for his own use which cost £10,000 and had a market value of £14,000

(2) introduced capital of £50,000

(3) withdrew £30,000 as salary.

The profit for the year was therefore?

Select ONE answer:

1. £9,600
2. £30,400
3. £70,400
4. £109,600

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Opening net assets £266,800 + Capital £50,000 – Drawings £40,000 + Profit (Balancing Figure) £9,600 = Closing Net Assets £286,400
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex, a sole trader, has been unable to calculate his business’ profit or loss for the year ended 31 December 2023 as a fire destroyed most of his accounting records.

He has, however, been able to provide the following information to his accountant.

(1) Net assets at 31 December 2022 were £23,000 and £32,500 as at 31 December 2023

(2) Alex introduced additional capital during the year of £4,000 in cash

(3) He took cash drawings of £2,500 and goods with a selling price of £800. The cost of the goods was £750 when purchased.

What was Alex’s profit or loss for the year ended 31 December 2023?

Select ONE answer:

1. £8,750 profit
2. £(1,750) loss
3. £9,800 profit
4. £(2,750) loss

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Opening capital £23,000 + Capital injection £4,000 – Drawings (£2,500 + £750) £3,250 = £23,750 == > Difference to Closing capital of £32,500 is profit = £8,750
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

A local taxes prepayment of £475 at the reporting date for his financial statements was treated as an accrual in preparing Alex’s a sole trader’s income statement.

As a result, Alex’s profit was?

Select ONE answer:

1. Understated by £950
2. Overstated by £950
3. Understated by £475
4. Overstated by £475

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Understated by 2 x £475 = £950
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.