As Level Accounting Unit 2 Revision

Topics: Balance sheet, Generally Accepted Accounting Principles, Liability Pages: 15 (4205 words) Published: October 9, 2012
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Bought to you by AS- Level Accounting Unit 2 Revision Notes Benstead Revision Notes: Types of Business Organisation: Sole Traders: Advantages:      Faster decision making Independence 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

Disadvantages:    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 Page 1

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  for more notes visit May feel isolated Ownership cannot be changed Partnerships: Advantages:     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

Disadvantages:      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 withdrawal More complicated, expensive and time consuming to set up than sole traders

Limited Liability companies-both PLC and LTD: Advantages:     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

Disadvantages:    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 company

Accounting Concepts (BOGCRAMP):   Business Entity-only information relevant to that business must be recorded. Not any personal uses. Objectivity-Factual information only must be recorded in the business accounts. Page 2

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      for more notes visit Going Concern-Assumes that the business will continue to trade for the foreseeable future. Consistency-requires that the business applies the same policies and procedures from one year to the next. E.g. depreciation. Realisation-Money should only be recorded when it is certain that it will be received. Accruals-Money, payments and receipts are matched for a time period when recording profit. Materiality-Only record significant expenses, e.g. paper clips wouldn’t be recorded. Prudence-where there is doubt in the value of Assets, or the level of profit, the lower value must always be used. This makes sure that profit is not overstated.

Further Aspects of the Preparation of the Final Accounts and Balance Sheets of Sole Traders: Sole Trader Income Statement Layout: XXX Income statement for the year ending XXX Sales Less Cost of Sales Opening stock Purchases Less closing stock Gross Profit Other Income Less Expenses: Rent Wages Rates Advertising Insurance Motor Expenses

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for more notes visit Etc Net Profit Sole Trader Balance Sheet XXX Balance Sheet as at (date) Fixed Asset Motor vehicles Machinery Current Assets: Trade Receivables Bank Closing stock Prepayments Less Current Liabilities: Trade Payables Overdraft Accruals Less Long-Term Liabilities Bank Loan Balancing figure Represented By: Capital + Profit -Drawings Balancing Figure

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for more notes visit Bad Debts RecoveredThis is recorded under ‘Other Income’ as bad debts recovered. This is added to gross profit. Income due and received in advanceIncome due is added to the relevant income so that the business is...
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