9706 · 1.5.2
Sole traders flashcards
Revision flashcards for Cambridge 9706 Sole traders (syllabus 1.5.2). Flip, recall, then mark a real past-paper question.
Card
COGS formula?
Opening inventory + Purchases − Closing inventory.
Card
Drawings treatment?
Reduce capital on SOFP — never an expense on SPL.
Card
Closing capital?
Opening capital + Net profit − Drawings.
Card
Vertical SPL order?
Revenue → COGS → Gross profit → Expenses → Net profit.
Card
Current assets examples?
Inventory, trade receivables, bank, prepayments.
Card
Why no appropriation?
Single owner — all profit belongs to them.
Card
What is the 'business entity concept' in the context of a sole trader?
The principle that the business is treated as separate from its owner for accounting purposes, even though there is no legal separation. This means personal transactions are kept separate from business records.
Card
How are 'drawings' treated in the final accounts of a sole trader?
Drawings are not an expense in the Income Statement. They are deducted from capital in the 'Financed by' section of the Statement of Financial Position.
Card
What is the formula for calculating closing capital for a sole trader?
Opening Capital + Additional Capital Introduced + Profit for the Year – Drawings = Closing Capital.
Card
An owner pays their personal car insurance from the business bank account. What is the double entry?
Dr Drawings account, Cr Bank account. This is not a business expense and does not affect the Income Statement.
Card
Where is the 'profit for the year' figure used after being calculated in the Income Statement?
It is added to the opening capital balance in the Statement of Financial Position as part of the calculation for closing capital.
Card
What is the accounting equation?
Assets = Capital + Liabilities. The Statement of Financial Position is a detailed expression of this equation.
Card
How is depreciation of a non-current asset treated in the final accounts?
It is recorded as an expense in the Income Statement and as accumulated depreciation (a deduction from the asset's cost) in the Statement of Financial Position.
Card
What is an accrued expense and where is it shown?
An expense incurred but not yet paid. The amount is added to the relevant expense in the Income Statement and shown as a current liability in the Statement of Financial Position.
Card
What is a prepaid expense and where is it shown?
An expense paid in advance. The prepaid amount is deducted from the relevant expense in the Income Statement and shown as a current asset in the Statement of Financial Position.