GRADE 10 LESSON

SOLE TRADER
ACCOUNTING CONCEPTS

WORKSHEET 1

Owner’s equity
Capital contribution The amount of money that the owner deposits in the bank account of the
business to start the business. From the business’s point of view, the
business owes the owner this money, as he will get it back one day when the
business closes.

Drawings The money and goods the owner takes for himself from the business

Owner’s equity The owner’s share in the business – the owner’s worth.
Owner’s equity represents:
- capital
- drawings
- profit or loss (difference between income and expenses)
Income increases owner’s equity and expenses decrease owner’s equity.
Owner’s equity = Assets – Liabilities

Cash in the business

Receipts All money received by the business and deposited in the business’s bank
account.
Examples: rent income, capital contribution, cash sales
Payments All money paid out by the business. Amounts drawn by cheque from the
business’s bank account.
Example: telephone, salaries, furniture, vehicles

Income / Expenses
Income It is the value received or receivable (still to be received) for the financial year.

Expenditure It is the value paid or payable (still to be paid) for the financial year.

The difference between income and expenses = profit / loss

6 Accounting Grade 10 1
Profit / Loss
Profit When the income of the business is more than its expenses

Loss When the expenses of the business is more than the income

Profit = income – expenses

Loss = expenses – income

ACTIVITY 1

Answer the following questions. Do not look up the answers!

1. What 3 concepts make up the Owner’s Worth?

2. When the owner takes something from the business for his own use, what is it called?

3. The amount the owner uses to start the business is called .................................?

4. What is the word that describes money received?

5. What is a payment?

6. When the income of a business is more than its expenses, it is called a ..........................?

7. What is a loss?

8. An amount that has been paid or is still to be paid in a financial year is called an ...................?

6 Accounting Grade 10 2
 ASSETS
Everything the business owns (possessions)
Assets are divided into Current Assets and Non-Current Assets

NON-CURRENT ASSETS CURRENT ASSETS

Items with a long life that the business bought Cash or possessions that can be converted into
with no intention to sell it – that will stay in the cash within 12 months.
business for more than 12 months
Land and Premises bought for Bank Cash deposited in the cheque
buildings running the business account

Vehicles Vehicles bought for use by Cash float Money kept in the cash register to
the business give change to customers

Equipment All items needed to run the Petty cash Cash kept aside to pay out small
business – cash register, amounts, like stamps, pens, milk
furniture, computers
Fixed deposit / Surplus funds can be Trading Goods bought to resell them at a
investment invested in a bank for a stock higher price
specific term (more than
12 months) at a specific Debtors People who buy goods on credit
interest rate. The funds are and pay later – they owe the
available at the end of the business money
term of investment

LIABILITIES

It is money owed to someone else

Liabilities are divided into Current liabilities and Non-Current liabilities

NON-CURRENT LIABILITIES CURRENT LIABILITIES

Debts that will be paid off over more than 12 Debt that can be paid off within 12 months.
months.

Mortgage loan A bank loan for purchasing land
and buildings – over a period of
20 – 30 years.
Loans Money that the business loans
(long-term) from a bank for more than 12
months. The business pays
interest on the outstanding
balance of the loan.
6 Accounting Grade 10
Bank overdraft The business withdraws
more money from the bank
account than what it had in
the account – the business
now owes the bank money
Creditors The people from whom the
owner buys goods on credit
– the business receives the
goods now and pays later.
The business owes the
creditors money.
Short-term loans It is the portion of the long-
term loan that will be repaid
within the next 12 months.
3
 ASSETS, LIABILITIES, EXPENSES, INCOME

Assets Liabilities
(What the business (What the business
OWNS) OWES)

Debit Credit
balance balance

Expenses Income
(Money paid out for the (Money which the
day-to-day running of business receives in the
the business) day-to-day running of the
business)

ACTIVITY 2

List the following under Assets, Liabilities, Expenses, Income and Owner’s Equity
(Use the correct names for the accounts)
Debtors Rent paid Capital Rates and taxes
Interest paid Stationery Petty cash Fixed deposit
Sales Advertising Vehicles Cash float
Equipment Rent received Telephone Profit
Salaries Wages Repairs Buildings
Trading stock Interest received Water and electricity Creditors
Packing material Discount allowed Loan from bank Bank (overdraft)
Discount received Drawings Bank (debit balance) Mortgage bond
Cost of sales Current income Commission received Consumables

6 Accounting Grade 10 4
 ANSWER SHEET

Assets Owners equity Liabilities

NON CURRENT ASSETS 1. NON CURRENT LIABILITIES

Fixed/Tangible assets 2.

3.
CURRENT LIABILITIES
Financial assets
Expenses Income

CURRENT ASSETS

6 Accounting Grade 10 5
 ANSWERS
6

1. What 3 concepts make up the Owner’s Net Worth?

Capital, Drawings, Net Profit

2. When the owner takes something from the business for his own use, what is it
called?

Drawings

3. The amount the owner uses to start the business is called .................................?

Capital

4. What is the word that describes money received?

Receipt

5. What is a payment?

Money paid out by a business

6. When the income of a business is more than its expenses, it is called a .............?

Profit

7. What is a loss?

When the expenses of a business is more than its income

8. An amount that has been paid or is still to be paid in a financial year is called an
...................?

Expenditure

Accounting Grade 10 Lesson plan – Week 2 – Lesson 4 of 4

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 ACTIVITY 2

Assets Owners equity Liabilities

NON CURRENT ASSETS 1. Capital NON CURRENT LIABILITIES

Mortgage bond
Fixed/Tangible assets 2. Drawings Loan from bank
Land & Buildings
Vehicles 3. Profit
Equipment
CURRENT LIABILITIES
Creditors
Expenses Income Bank (overdraft)
Interest paid Sales
Financial assets
Salaries Rent received
Fixed deposit Packing material Interest received
Cost of sales Current income
Rent paid Commission received
Stationery Discount received
CURRENT ASSETS Advertising
Stock Wages
Debtors Discount allowed
Bank (debit balance) Telephone
Cash float Repairs
Petty cash Water and electricity
Rates and taxes
Consumables

Accounting Grade 10 Lesson plan – Week 2 – Lesson 4 of 4 7

 CHALKBOARD SUMMARY

Owner’s Equity
• Capital Profit
• Drawings Income – Expenditure
• Net Profit Loss
Expenditure - Income
Cash in business
• Receipts
• Payments

ACCOUNTING
CONCEPTS

Non-Current
• Land & Buildings
• Vehicles
• Equipment
• Investments ASSETS LIABILITIES

Current
Non- Current Current
• Stock
• Mortgage • Creditors
• Debtors
• Loans • Short term loans
• Bank
• Bank overdraft
• Cash float
• Petty Cash

Accounting Grade 10 Lesson plan – Week 2 – Lesson 4 of 4 8