From the trial balance and adjustments, prepare the income statement of a sole proprietor for the year.

1. 1 · Do the workings first. Revenue, net purchases, each adjusted expense, depreciation, the change in allowance.
2. 2 · Revenue. Sales − returns inwards.
3. 3 · Cost of sales. Opening inventory + net purchases + carriage inwards − closing inventory.
4. 4 · Gross profit. Revenue − cost of sales.
5. 5 · Expenses.
   • Add accruals, deduct prepayments.
   • Depreciation for each asset.
   • Bad debts and the change in the allowance.
   • Finance costs such as loan interest.
6. 6 · Profit for the year. Gross profit + other income − total expenses.
7. 7 · Heading and check. Name and 'Income statement for the year ended …'; re-add to check.

Scoring tip: Number your workings and refer to them in the statement; a neat statement with workings earns method marks even if one figure is wrong.