Harry Fraser Unit 5 Assignment 1
Task1
89 Welbeck Road
Morden
Surrey
SM3 4OP
5th October 2015
254 Middleton Road
Carshalton
Surrey
SM5 8NS
Dear Mr Khan
Ref: Understand what a sole trader is, purpose of accounting and why it's important
to keep a financial record.
A sole trader is someone who owns a business by themselves; this means that all of
their capital income must be invested by their own money, like savings or personal
loans secured on an asset like their home. As a sole trader is a single person the
amount of money they put into the business is limited and this therefore limits the
size of the business. However the advantage of this is that the owner can keep all of
the profits for themselves.
There are many different purposes of accounting including, recording/monitoring
transactions, keeping control of transactions, management of the business and to
measure the financial performance of the business.
Recording and monitoring transactions is important as it allows the business to
control their transactions, manage the business and measure their financial
performance. Records should be accurate and kept up to date. All of the inflows and
outflows must be recorded to keep out of trouble with HMRC as tax payments could
be wrong otherwise.
By failing to properly record transactions within the business you may find yourself
unable to pay bills, keep on top of payments or wrongly pay HMRC. This is bad for
the business as it will affect how well banks will operate with you. Also failing to meet
deadlines or failing to supply correct payments to HMRC can result in a fine.
A manager who has clear access to accounts will be able to make better decisions
and plans for the business. A manager needs to make sure the business has enough
money to pay wages to employees and pay bills as well as other aspects such as
ordering stock.
The last purpose of accounting is to measure the financial performance of the
business. This would include whether they are making a profit or a loss. Records of
Task1
89 Welbeck Road
Morden
Surrey
SM3 4OP
5th October 2015
254 Middleton Road
Carshalton
Surrey
SM5 8NS
Dear Mr Khan
Ref: Understand what a sole trader is, purpose of accounting and why it's important
to keep a financial record.
A sole trader is someone who owns a business by themselves; this means that all of
their capital income must be invested by their own money, like savings or personal
loans secured on an asset like their home. As a sole trader is a single person the
amount of money they put into the business is limited and this therefore limits the
size of the business. However the advantage of this is that the owner can keep all of
the profits for themselves.
There are many different purposes of accounting including, recording/monitoring
transactions, keeping control of transactions, management of the business and to
measure the financial performance of the business.
Recording and monitoring transactions is important as it allows the business to
control their transactions, manage the business and measure their financial
performance. Records should be accurate and kept up to date. All of the inflows and
outflows must be recorded to keep out of trouble with HMRC as tax payments could
be wrong otherwise.
By failing to properly record transactions within the business you may find yourself
unable to pay bills, keep on top of payments or wrongly pay HMRC. This is bad for
the business as it will affect how well banks will operate with you. Also failing to meet
deadlines or failing to supply correct payments to HMRC can result in a fine.
A manager who has clear access to accounts will be able to make better decisions
and plans for the business. A manager needs to make sure the business has enough
money to pay wages to employees and pay bills as well as other aspects such as
ordering stock.
The last purpose of accounting is to measure the financial performance of the
business. This would include whether they are making a profit or a loss. Records of
