Preparation of Final Accounts of Sole ProprietorsQ-1 | Final Accounts of Sole ProprietorsQuestion 4777 of 40

If Closing Stock appears in the Trial Balance: The closing inventory is then not entered in Trading Account. It is shown only in the balance sheet. [Nov. 2018, 2 Marks; June 2024, 2 Marks]; [MTP Jan. 2025]

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Detailed Solution & Explanation

True: If closing stock appears in the Trial balance it indicates that it is already been adjusted with the purchase and will be shown in the Balance Sheet only.

About This Chapter: Final Accounts

Paper

Paper 1: Accounting

Weightage

25-30%

Key Topics

Sole Proprietor, NPO, Manufacturing

This chapter covers Sole Proprietor, NPO, Manufacturing and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 25-30% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Trial Balance

A statement listing all ledger account balances at a specific date to verify the arithmetic accuracy of the double-entry bookkeeping system. It serves as the first step in preparing final accounts.

The first part of the final accounts prepared to ascertain the Gross Profit or Gross Loss from trading (buying and selling) activities during an accounting period. It includes opening stock, purchases, direct expenses, sales, and closing stock.

Balance Sheet

A statement showing the financial position of a business at a particular date, listing all assets on one side and all liabilities and capital on the other side. It is not an account but a statement.

Related Comparison Tables

Revenue Expenditure vs Capital Expenditure: Accounts Trading Account vs P&L Account: Final Accounts Explained SLM vs WDV Depreciation: CA Foundation Accounts

More Questions from Preparation of Final Accounts of Sole Proprietors

Mr. A accepts two bills of exchange on June 1, 2024 for ₹ 1,50,000 and 60,000 drawn on him by Mr. B. The bill of exchange for ₹ 1,50,000 is for two months while the bill of exchange for 60,000 is for three months. Mr. B got the first bill discounted with the bank for ₹ 1,49,000 on June 3, 2024. On August 2, 2024 Mr. A requested Mr. B. to cancel both the bills and drew a new bill on him with the combined amount of both the bills along with interest @ 12% per annum for a period of two months. Before the due date of the renewed bill on September 3, 2024, Mr. A becomes insolvent and only 40 paise in a rupee could be recovered from his estate. You are required to give the journal entries in the books of Mr. B. [Jan. 2025, 5 Marks]

Discuss the limitations which must be kept in mind while evaluating the Financial Statements. [Nov. 2018, 4 Marks]

Trading account

Profit and loss account

Balance sheet

Manufacturing A/c

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