Prepare a trading profit and loss account and balance sheet for two companies

Table of contents

1. Executive summary: ……………………………………………………………………..2
2. Introduction: ……………………………………………………………………………..3
3. Bottom Line Consulting:

1. Sole trader ……………………………………………………………………….4
2. Trading, Profit and Loss Account  …………..…………………………………..4
3. Balance sheet: ……………………………………………………………………5

4. Blessed Company:

1. Partnership………………………………………………………………………..6
2. Trading, Profit and Loss Account …….……..………………………..………...6
3. Balance sheet: ………………………………………………………...…………7

5. Talent Corporation:

1. Corporation………………………………………………………………………9
2. Trading, Profit and Loss Account  …………..………………………………….9
3. Balance sheet: ………………………………...………………………………..10

6. The information needs of different group user vary…………………………………….11
7. Conclusion: …………………………………………………………………….………..13
8. References: ………………………………………………………………………………14
9. Appendix:………………………………………………………………………………...15

I/ Executive summary:

          Task 1 is about Bottom Line Consulting. Her company is sole traders. I have to prepare financial statements from incomplete records including trading profit and loss account and balance sheet.  Each financial statement will represent in a page. Notes of financial statement will be records after finishing trading, profit and loss account and balance sheet.

            Task 2 also involves in Blessed company. However, the form of his business is partnership. I also have to prepare a trading profit and loss account and balance sheet for the year ended 31 December, 2009. I have to prepare financial statements from incomplete records. Financial statements which I prepared include two parts:

• Trading profit and loss account
• Balance sheet

            Task 3 is about Talent Corporation. It is a limited company. So, it has some different accounts with sole traders and partnership like capital and reserve, ordinary share and preference share capital. I also prepare a trading, profit and loss account and balance sheet for the year ended 31 December 1997 from a trial balance. After finishing financial statements, I prepared a note in order to explain figures in financial statements.

II/ Introduction:

            Financial statements are one of the basic requirements which companies need to have for its business. Financial statements provide different information for other users like managers of the company, shareholders, and trade contacts, providers of finance, employees and government.  Basing on financial statements the company can see the results in a period. The results of a business activities are presented in financial terms in the form of what are commonly called ‘accounts’, (BPP Professional Education, 2004). Financial statements include three statements:

• Trading, profit and loss account
• A balance sheet

            Each format represents different meaning in the result of business. And it is used with different purposes in other form business. There are three form of business including sole trader, partnership and limited company.

            Generally, purposes of financial statements in three form of business are similar. Its purpose is to show the financial position of a business on a certain date.

            A balance sheet is used to provide insight into a company’s assets and debts at a particular point in time. Information about the company’s shareholder equity is included as well. Typically, a company lists its assets on the left side of the balance sheet and its debts and liabilities on the right. Sometimes, however, a balance sheet has assets listed at the top, debts in the middle, and shareholders’ equity at the bottom.

            Trading, profit and loss account is to show the revenue and the amounts spent. The total revenue earned during a period is compared with the expenditure incurred in earning it. The trading, profit and loss account will show in detail how the profit (or loss) of a period has been made. Owners need to know how much income they earned and costs they have to pay. Thus, the trading, profit and loss account is prepared to meet those requirements.

III/ Task 1: Bottom Line Consulting

1. Sole trader

A sole trader is a person trading on their own. They control manage and own the business. The advantages of a sole trader are ease in organizing and low cost of organizing. The disadvantages of a sole trader are difficultly in raising large amounts of capital and unlimited liability.

2. Trading, profit and Loss Account.

3. Balance Sheet