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L4 Final Assignment: Appendix – Sole Trader
L4 Accounting & Finance May 2024

You are required to create accounts for a UK based sole trader, John Smith, for the years ended 31
December 2022, 31 December 2021, and 31 December 2020. John Smith is a freelance web
developer who operates his business from home. He provides web development services to small
businesses and individuals. You are given the following information:

Year ended 31 December 2022:
Revenue: £120,000
Cost of sales: £25,000
Salaries and wages: £40,000
Rent: £12,000
Insurance: £2,000
Office supplies: £1,500
Marketing expenses: £4,000
Bad debt expense: £1,500
Depreciation: £3,000

Year ended 31 December 2021:
Revenue: £110,000
Cost of sales: £22,000
Salaries and wages: £38,000
Rent: £11,000
Insurance: £1,800
Office supplies: £1,200
Marketing expenses: £3,500
Bad debt expense: £1,000
Depreciation: £2,500

Year ended 31 December 2020:
Revenue: £100,000
Cost of sales: £20,000
Salaries and wages: £35,000
Rent: £10,000
Insurance: £1,500
Office supplies: £1,000
Marketing expenses: £3,000
Bad debt expense: £500
Depreciation: £2,000

Other information:
John withdrew £30,000 for personal use in 2022, £28,000 in 2021, and £25,000 in
2020. John has no loans or mortgages.
John’s capital account at the beginning of 2022 was £100,000.
You are required to prepare the following for 2022:

Cash at bank 27,600

Accounts receivable 12,000

Office supplies 0

Total current assets

Fixed assets:

Computer equipment 15,000

Accumulated depreciation (for 3 years)

Total fixed assets

Total assets

Liabilities and equity

Current liabilities: 0

Accounts payable 0

Total current liabilities

Equity:

Capital account 124,900 22,700

Net profit after tax

Total equity

Total liabilities and equity

Cash Flow Statement:

Year ended 31 Dec 2022

Cash flows from operating activities

Cash receipts from customers

Cash payments for expenses

Cost of sales

Salaries and wages

Rent

Insurance

Office supplies

Marketing expenses

Bad debt expense

Depreciation

Net cash from operating activities

Cash flows from investing activities

Purchase of computer equipment 10,000

Net cash used in investing activities

Cash flows from financing activities

Withdrawals by owner

Net cash used in financing activities

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