Overview

Final Accounts of Sole Proprietors — I: the basic picture, without adjustments

Every accounting year ends with the same two questions: how much profit or loss did the business make, and what does the business own and owe on the closing date? A sole trader answers these by preparing a set of Final Accounts — the Trading and Profit and Loss Account (an income statement, answering the profit question) and the Balance Sheet (a position statement, answering the ownership question).

This chapter builds the FOUNDATIONAL skill: preparing final accounts directly from a Trial Balance, before any adjustments are introduced. (A later chapter, Final Accounts of Sole Proprietors – II, extends this exact same skill to handle adjustments such as outstanding expenses, prepaid expenses, and depreciation — keep this chapter's method firmly in mind, since Part II builds directly on top of it.) Preparing a Trading and Profit and Loss Account from a Trial Balance is the same foundational skill CBSE/NCERT's Financial Statements of Sole Proprietorship chapter also builds, even though the format and worked illustrations here follow TN's own textbook style.