Sole traders: Practice Questions

What is the primary objective of preparing an income statement for a sole trader?

Which of the following is an example of revenue expenditure for a sole trader?

Which of the following items would be classified as a non-current asset in the statement of financial position of a sole trader?

A sole trader's draft financial statements show a capital balance of \(\$45,000\). It was later discovered that the purchase of a computer for \(\$2,000\) had been incorrectly recorded as a repair (revenue expenditure). Depreciation on the computer at \(20\%\) per annum should have been provided. What is the corrected capital balance?

State the primary purpose of a sole trader preparing an income statement at the end of the financial year.

Fatima is a sole trader who maintains a set of accounting records. At the end of her financial year, 31 August 2023, she had the following balances:

- Motor vehicles at cost: \(\$12,000\)
- Provision for depreciation on motor vehicles: \(\$3,000\)
- Inventory: \(\$2,500\)
- Trade receivables: \(\$1,800\)
- Trade payables: \(\$1,200\)
- Cash at bank: \(\$600\)
- Capital at 1 September 2022: \(\$10,000\)

During the year, her profit was \(\$3,200\) and she took \(\$2,500\) for personal use.

(a) Calculate the total non-current assets at 31 August 2023.
(b) Calculate the total current assets at 31 August 2023.
(c) Prepare a calculation to show the closing capital for Fatima at 31 August 2023.