1. Analytical methods are used to obtain the information required to provide a Final Account.
2. To help traders prepare a Final Account, they must at least keep the following records:
(a) records of receipt of money and payment of money or Cash Book
(b) cash balances in hand and in banks at the beginning and end of the year.
(c) records of debtors and creditors.
(d) records of assets and liabilities.
3. By making Cash Book analysis, the following information is available: (a) purchase and sale of merchandise with cash and check.
(b) purchase and sale of assets with cash or checks.
(c) payments by debtors and payments to creditors.
(d) expenses such as salaries, rents, insurance, payment rates, and so on. (e) proceeds such as rental received, discounts received, dividends received, and so on.
(f) the cash takeover by the owner.
(g) cash transfer to the bank or the issuance of checks for business use.
4. By making an analysis of the debtor account, the following information is available:
(a) the beginning balance of the debtor
(b) payments by debtors and discounts are given
(c) credit sales
(d) sales returns
(e) bad debts
(f) the final balance of the debtor
5. By making an analysis of creditors’ accounts, the following information is available:
(a) the beginning balance of the creditor
(b) payments to creditors and discounts received
(c) credit purchase
(d) purchase returns
(e) the final balance of the creditor
6. Other information to be sought in order to set up a Final Account is:
(a) past expenses such as unexpired insurance.
(b) accrued expenses such as unpaid payment rates.
(c) prior income such as prior lease receivables.
(d) accrued income such as interest has not been received.
(e) any provision such as provision for depreciation and provision for doubtful debts.
Calculating Credit Sales and Purchases
Credit sales to debtors can be calculated in two ways:
(a) statement of return
(b) how to set up a Debt Control Account
Prepare a Trading Account And Profit and Loss Account
1. Trading accounts are provided at the end of the accounting year to determine gross profit.
2. The particulars required to prepare the Trading Account are:
(a) total sales
(b) total purchase
(c) initial stock value and final stock
(d) total sales returns (in)
(e) total purchase return (out)