As Level Accounting Unit 2 Revision Essay

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Benstead Revision Notes: Types of Business Organisation: Sole Traders: Advantages:      Faster decision making Independence Quicker and cheaper to establish All profits belong to the sole trader Competitors know less about the business’s success as the accounts don’t have to be published

Disadvantages:    Unlimited liability-can lose both business’s assets and their own personal possessions. Capital is limited to the wealth of one individual. May limit business growth. Have to work long hours and have poor holidays and rewards
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The amount owed would be added to the relevant income, in this case interest due, which would be added to Gross profit under other income. Income received in advance is included in other income added to gross profit. For example you this could happen with Rent: Only rent received for this year should be included in this year’s profit and loss account. This means that if there are any payments for the next financial year, you have to deduct the extra amount from the amount from this year in the other income section of the income statement. E.g. if a business received a total payment of £42,000 for rent in advance, and £300 of it was for the next financial year, you would include only the £39,000 in this year’s income statement under the other income section. Provisions for Doubtful DebtsUsed to record the amount written off each year and shows the total depreciation to date. Credit provision for depreciation with New Year’s amounts Debit income statement as an expense. DepreciationPurposeThe reason for recording depreciation is that it would allow the business to be prudent as the depreciation charge would be deducted from profit. This means that the loss of value of the fixed asset would be recorded. Depreciation is the loss of value of fixed assets due to: Usage/wear and tear Passage of time Depletion (Not-Complete) Obsolescence (Out of Date)

There are two main methods of depreciation:
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