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The accounting equation of a sole proprietorship is assets = liabilities + owners equity.
Revenue = Sales - Returns and Allowances. Gross Profit = Revenue - Cost of Goods Sold (COGS) Operating Income = Gross Profit - Operating Expenses. Net Income = Operating Income + Non-operating Income - Non-operating Expenses.
How to Prepare a Balance Sheet? Compose a heading at the head of the balance sheet. Rundown every current asset. Record all long-term assets. Include long-term assets with current assets. Impart the current liabilities. Rundown the long-term liabilities. Include all your long-term liabilities with current liabilities.
To do this you require a clear picture of your income and expenditure. This can also help you budget and ensure you put enough money aside to pay HMRC your tax and NI bill by the end of January each year. Sole traders are legally required to maintain a record of their income and expenditure for at least five years.
Simple bookkeeping method (aka income-statement only) Step 1: Start with a list (or chart) of accounts. Step 2: Gather your business transactions. Step 3: Sort your transactions. Step 4: Add expenses that didnt go through the bank statement. Step 5: Income statement (a.k.a. Profit and Loss) Step 6: Home office expenses.
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Yes, a non-CPA can prepare financial statements using a few financial frameworks, including FRF (Financial Reporting Framework), tax, cash, and generally accepted accounting principles (GAAP) bases of accounting.
The 9 steps in preparing financial statements are: Identify all business transactions for the period. Record transactions in a general journal. Resolve anomalies and make adjusting journal entries. Post the adjusted journal entries to the general ledger. Prepare an income statement. Prepare a balance sheet.

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