What you'll learn
How to prepare and read a sole trader's accounts.
Key ideas
- The income statement shows profit/loss; the statement of financial position shows assets, liabilities and capital.
- Gross profit = sales − cost of sales; net profit = gross profit − expenses.
- Current vs non-current assets; drawings.
Exam tips
- Learn the cost of sales formula.
- Classify assets correctly.
Common mistakes
- Confusing gross and net profit.
- Treating drawings as an expense.