Financial Statements for Sole-proprietorship

What is a Sole Proprietorship?

• Business owned by president

• Business owned by several companies

• Business owned by one person

• Business owned by a company

Which of the following is a disadvantage to a sole-trader?

• Easy to set up

• No need to share profits with anyone

• Has no one to share responsibility with

• Low initial start-up costs

Which of the following are classified as current assets in a business?

(a) Cash at bank

(b) Money owed by customer

(c) Prepaid expense

(d) Accrued expense

• (a), (b) and (c)

• (a), (c) and (d)

• (a), (b) and (d)

• (b), (c) and (d)

Which of the following is a non-current asset in the statement of financial position?

• Cash at bank

• Closing inventory

• Trade receivables

• Motor Vehicle

What does a sole-trader discover from the contents of their income statement?

• Amount spent on non-current assets

• Annual drawings

• Bank account balance

• Profit or loss for the year

Which of the following accurately represents the statement of financial position for a sole-trader?

• assets = liabilities - capital

• capital = assets + liabilities

• capital = assets - liabilities

• liabilities = capital - assets

Carly's trial balance for 31 December 2020 includes the following balances:

Sales $3,200

Inventory at 1 January 2020 $200

Purchases $1,800

Expenses $800

Inventory at 31 December 2020 $300

What is her profit for the year?

• $400

• $500

• $700

• $1,500

What is shown as a liability in a statement of financial position?

• bank overdraft

• fixtures and fittings

• inventory

• prepaid rent

The following information is available for a sole-trader for the year ended 30 September 2020.

Sales $59,200

Inventory at 1 October 2019 $2,500

inventory at 30 September 2020 $3,800

Purchases $28,600

What is the gross profit for the year?

• $24,300

• $29,300

• $30,600

• $31,900

Susan receives a cheque from a tenant on 10 December 2019. This is rent due to the business for the period 1 January to 31 March 2020.

How is this treated in Susan's financial statements for the year ended 31 December 2019?

• accrued expense

• accrued income

• prepaid expense

• prepaid income