Class 11 Sole Trader Project: Journal to Final Accounts

A sole trader accountancy project becomes much easier when you stop treating the journal, ledger and final accounts as separate assignments. They are different views of the same business story.

A customer buys on credit. That one event appears first as a transaction, then as a journal entry, then in the customer’s ledger account. If the customer still owes money at the end of the period, that balance reaches the balance sheet. Nothing should appear there by magic.

This guide follows Paper Trail Stationery, a fictional shop owned by Meera, through its first month. You will get 20 connected transactions, their journal entries, every ledger account’s postings, an unadjusted trial balance, working notes, final accounts and closing entries. All amounts and business names in the example are invented for learning.

The finished example earns gross profit of Rs 59,000 and net profit of Rs 40,300. Its balance sheet totals Rs 2,50,300. Try to reach those figures yourself before checking the answers.

Plan the file before writing the accounts

Use your teacher’s required sequence and presentation rules where supplied. A practical project file can contain a title page, acknowledgement or certificate if required, index, business introduction, objectives, assumptions, transaction list, journal, ledger, trial balance, adjustments, final accounts, findings and bibliography.

Do not invent signatures or claim that these are the actual books of a shop. Label a fictional case as a hypothetical study. If your assignment requires a business visit, original invoices or a particular number of transactions, this model is a worked reference to adapt to those instructions.

For this project, a suitable objective is: “To record one month’s transactions of a sole proprietorship and prepare accounts showing its profit and financial position.”

You can make the file easier to follow by numbering transactions J1 to J20 and using those references throughout. Add page numbers only after the work is in its final order.

The assumptions for Paper Trail Stationery

• The accounting period is 1 March to 31 March 2026, one month, not a full year.
• The shop begins business on 1 March, so opening stock and all opening account balances are nil.
• Amounts are in rupees. Tax entries are excluded from this simplified exercise.
• The periodic inventory method is used: goods bought for resale go into Purchases, and closing stock is established at month-end.
• Furniture is for use in the shop. It is not merchandise for resale.
• Insurance cost is allocated evenly across its twelve-month cover period.
• The only month-end adjustments are closing stock, outstanding salaries, prepaid insurance and furniture depreciation, specified below.

There are four adjustment items here; closing stock is kept separate from the three expense adjustments so that you can see its effect on gross profit clearly.

The 20 business transactions

1. 1 March: Meera started Paper Trail Stationery by introducing Rs 2,00,000 into its bank account.
2. 1 March: Withdrew Rs 20,000 from the bank for shop cash.
3. 1 March: Bought and put shop furniture into use, paying Rs 24,000 by bank.
4. 3 March: Bought stationery for resale on credit from Asha Supplies, Rs 60,000.
5. 5 March: Bought further goods for resale, paying Rs 20,000 by bank.
6. 5 March: Paid Rs 2,000 cash to bring purchased goods to the shop.
7. 7 March: Sold goods for cash, Rs 30,000.
8. 9 March: Sold goods on credit to Riya Stores, Rs 45,000.
9. 11 March: Riya Stores returned goods invoiced at Rs 3,000.
10. 12 March: Returned goods invoiced at Rs 4,000 to Asha Supplies.
11. 14 March: Received Rs 40,000 by bank from Riya Stores in full settlement of its Rs 42,000 balance; allowed Rs 2,000 cash discount.
12. 16 March: Paid Asha Supplies Rs 39,000 by bank to settle Rs 40,000 of the amount owed; received Rs 1,000 cash discount.
13. 18 March: Paid March shop rent of Rs 6,000 by bank.
14. 19 March: Paid shop staff salaries of Rs 8,000 by bank for March.
15. 20 March: Paid Rs 12,000 by bank for insurance covering 1 March 2026 to 28 February 2027.
16. 22 March: Meera withdrew Rs 5,000 cash for personal use.
17. 23 March: Meera took stationery costing Rs 2,000 for personal use.
18. 25 March: Sold goods for cash, Rs 25,000.
19. 27 March: Made a fresh credit sale of Rs 20,000 to Riya Stores.
20. 30 March: Paid the March shop electricity bill of Rs 1,500 in cash.

Notice the wording in transaction 12. It settles Rs 40,000 of the debt, not the whole supplier account. The supplier must still appear in the closing books.

For a supporting-documents section, prepare clearly labelled specimen cash memos for cash sales, invoices for credit purchases and sales, payment vouchers for expenses, and a stock-count sheet. A specimen document should reproduce the matching date and amount, not introduce a fresh transaction.

Journal entries for the project

The table below is a compact journal: each row contains all debits and credits for one entry. J11 and J12 are compound entries. Amounts on each side must add to the same total.

Ref.	Date in March	Debit account and Rs	Credit account and Rs
J1	1	Bank 200,000	Capital 200,000
J2	1	Cash 20,000	Bank 20,000
J3	1	Furniture 24,000	Bank 24,000
J4	3	Purchases 60,000	Asha Supplies 60,000
J5	5	Purchases 20,000	Bank 20,000
J6	5	Carriage inwards 2,000	Cash 2,000
J7	7	Cash 30,000	Sales 30,000
J8	9	Riya Stores 45,000	Sales 45,000
J9	11	Sales returns 3,000	Riya Stores 3,000
J10	12	Asha Supplies 4,000	Purchases returns 4,000
J11	14	Bank 40,000 Discount allowed 2,000	Riya Stores 42,000
J12	16	Asha Supplies 40,000	Bank 39,000 Discount received 1,000
J13	18	Rent 6,000	Bank 6,000
J14	19	Salaries 8,000	Bank 8,000
J15	20	Insurance 12,000	Bank 12,000
J16	22	Drawings 5,000	Cash 5,000
J17	23	Drawings 2,000	Purchases 2,000
J18	25	Cash 25,000	Sales 25,000
J19	27	Riya Stores 20,000	Sales 20,000
J20	30	Electricity 1,500	Cash 1,500

For your handwritten journal, use your prescribed Date, Particulars, Ledger Folio, Debit and Credit columns. Put each account on its own line, mark debit accounts “Dr”, indent credit accounts with “To”, and write a short narration beneath the entry. The transaction sentences above provide the facts for those narrations. Enter actual ledger page numbers in the folio column after posting.

For example, J11 becomes:

• Bank A/c Dr Rs 40,000
• Discount Allowed A/c Dr Rs 2,000
• To Riya Stores A/c Rs 42,000

Narration: Being the amount received by bank and discount allowed in full settlement of Riya Stores’ existing balance.

Four entries worth slowing down for

J2 is a transfer within the business. Cash rises and bank falls. Capital does not change because Meera has not invested anything new.

J3 is furniture, not purchases of goods. Paper Trail sells stationery and uses the furniture. Charging its entire Rs 24,000 cost as merchandise would distort this month’s trading result.

J11 records a discount separately. Riya’s debt falls by Rs 42,000 although only Rs 40,000 enters the bank. The remaining Rs 2,000 is Discount Allowed.

J17 records goods drawings at cost. Drawings rises by Rs 2,000 and Purchases falls by Rs 2,000. No sale to a customer has occurred.

These choices follow the recording principles in NCERT’s Recording of Transactions I. The shop, amounts and sequence here are an original worked example.

Post every account to the ledger

Below is the complete posting schedule before month-end adjustments and closing transfers. Each J reference points to the dated journal entry above. “Dr” and “Cr” in the last column describe the balance, not which side receives a balancing figure.

Account	Debit postings: reference and Rs	Credit postings: reference and Rs	Balance
Bank	J1: 200,000; J11: 40,000	J2: 20,000; J3: 24,000; J5: 20,000; J12: 39,000; J13: 6,000; J14: 8,000; J15: 12,000	111,000 Dr
Capital	Nil	J1: 200,000	200,000 Cr
Cash	J2: 20,000; J7: 30,000; J18: 25,000	J6: 2,000; J16: 5,000; J20: 1,500	66,500 Dr
Furniture	J3: 24,000	Nil	24,000 Dr
Purchases	J4: 60,000; J5: 20,000	J17: 2,000	78,000 Dr
Asha Supplies	J10: 4,000; J12: 40,000	J4: 60,000	16,000 Cr
Carriage inwards	J6: 2,000	Nil	2,000 Dr
Sales	Nil	J7: 30,000; J8: 45,000; J18: 25,000; J19: 20,000	120,000 Cr
Riya Stores	J8: 45,000; J19: 20,000	J9: 3,000; J11: 42,000	20,000 Dr
Sales returns	J9: 3,000	Nil	3,000 Dr
Purchases returns	Nil	J10: 4,000	4,000 Cr
Discount allowed	J11: 2,000	Nil	2,000 Dr
Discount received	Nil	J12: 1,000	1,000 Cr
Rent	J13: 6,000	Nil	6,000 Dr
Salaries	J14: 8,000	Nil	8,000 Dr
Insurance	J15: 12,000	Nil	12,000 Dr
Drawings	J16: 5,000; J17: 2,000	Nil	7,000 Dr
Electricity	J20: 1,500	Nil	1,500 Dr

Use the schedule to prepare individual ledger accounts in your file. Debit postings go on the left and credit postings on the right. In the particulars column, name the corresponding account from the journal entry; use separate lines where an entry has more than one counterpart.

Riya Stores: a full ledger example

Debit side	Rs	Credit side	Rs
9 March: To Sales	45,000	11 March: By Sales Returns	3,000
27 March: To Sales	20,000	14 March: By Bank	40,000
		14 March: By Discount Allowed	2,000
		31 March: By Balance c/d	20,000
Total	65,000	Total	65,000

On 1 April, the Rs 20,000 balance is brought down on the debit side as “To Balance b/d”. It is an amount receivable from the customer.

The mid-month settlement did clear Riya’s earlier debt. The later credit sale created a new debt. This is why reading only the words “full settlement” can lead to a wrong closing balance.

Check the cash and bank accounts independently

Cash receipts are Rs 20,000 from the bank plus cash sales of Rs 30,000 and Rs 25,000: Rs 75,000. Cash payments are carriage Rs 2,000, drawings Rs 5,000 and electricity Rs 1,500: Rs 8,500. Cash left is Rs 66,500.

Bank receipts are capital Rs 2,00,000 plus Riya’s payment Rs 40,000: Rs 2,40,000. Bank payments total Rs 1,29,000. Bank left is Rs 1,11,000.

Neither account becomes negative at any point in the transaction sequence. That is a useful realism check when designing your own project.

For more help separating calculations from the main account, see how to present accountancy working notes.

Prepare the unadjusted trial balance

Paper Trail Stationery: Trial Balance as at 31 March 2026, before adjustments

Account	Debit Rs	Credit Rs
Bank	111,000
Capital		200,000
Cash	66,500
Furniture	24,000
Purchases	78,000
Asha Supplies		16,000
Carriage inwards	2,000
Sales		120,000
Riya Stores	20,000
Sales returns	3,000
Purchases returns		4,000
Discount allowed	2,000
Discount received		1,000
Rent	6,000
Salaries	8,000
Insurance	12,000
Drawings	7,000
Electricity	1,500
Total	341,000	341,000

Purchases is Rs 78,000 here because Rs 80,000 of goods were bought and Rs 2,000 was already credited for goods drawings. Purchases Returns remains a separate Rs 4,000 credit balance at this stage.

Do not deduct the returns from Purchases in this trial balance while also keeping the separate credit balance. That would count the same return twice.

A trial balance compares debit and credit balances. It does not prove that every account is correctly classified or that no transaction was omitted. NCERT’s Trial Balance and Rectification of Errors explains these limitations. In this project, a furniture purchase wrongly debited to Purchases would still leave the two trial-balance totals equal.

Month-end adjustments and working notes

The following additional information is available on 31 March:

1. Closing stock is valued at Rs 18,000, including appropriate inward freight in its cost. Its net realisable value is higher, so no further reduction is needed.
2. A further Rs 1,000 of March staff salaries is unpaid.
3. The Rs 12,000 insurance policy covers twelve months from 1 March 2026.
4. Charge furniture depreciation at 10% per annum, on cost, for one month’s use.

These facts are additional to the unadjusted trial balance. The entries below have not already been included in it.

Working note 1: stock and cost of goods sold

Goods bought: Rs 80,000. Less goods drawings: Rs 2,000. Less purchases returns: Rs 4,000. That leaves net purchases of Rs 74,000.

Cost of goods sold = Opening stock + Net purchases + Carriage inwards - Closing stock.

For Paper Trail: 0 + 74,000 + 2,000 - 18,000 = Rs 58,000.

The closing-stock entry is: Closing Stock A/c Dr Rs 18,000; To Trading A/c Rs 18,000. This model uses that entry, not an adjustment through Purchases.

Working note 2: salaries

March salaries = Paid Rs 8,000 + Outstanding Rs 1,000 = Rs 9,000.

Entry: Salaries A/c Dr Rs 1,000; To Outstanding Salaries A/c Rs 1,000.

Working note 3: insurance

Monthly insurance = Rs 12,000 / 12 = Rs 1,000. Eleven months remain after 31 March, so prepaid insurance is Rs 11,000.

Entry: Prepaid Insurance A/c Dr Rs 11,000; To Insurance A/c Rs 11,000.

Working note 4: depreciation

Depreciation = Rs 24,000 x 10% x 1/12 = Rs 200.

Entry: Depreciation A/c Dr Rs 200; To Furniture A/c Rs 200.

Furniture’s closing carrying amount is Rs 24,000 - Rs 200 = Rs 23,800. This project credits the asset directly for depreciation.

The adjustment approach is supported by NCERT’s Financial Statements II. Apply each adjustment once when moving from this project’s unadjusted figures to its final accounts.

Trading Account: calculate gross profit

Paper Trail Stationery: Trading Account for the month ended 31 March 2026

Debit side	Rs	Credit side	Rs
Opening stock	0	Sales 1,20,000 less returns 3,000	1,17,000
Purchases 78,000 less returns 4,000	74,000	Closing stock	18,000
Carriage inwards	2,000
Gross profit c/d	59,000
Total	1,35,000	Total	1,35,000

The Purchases figure of Rs 78,000 already excludes goods drawings. Do not subtract Rs 2,000 again.

Check gross profit another way: Net sales Rs 1,17,000 - Cost of goods sold Rs 58,000 = Rs 59,000.

Profit and Loss Account: calculate net profit

Paper Trail Stationery: Profit and Loss Account for the month ended 31 March 2026

Debit side	Rs	Credit side	Rs
Rent	6,000	Gross profit b/d	59,000
Salaries: 8,000 + 1,000	9,000	Discount received	1,000
Insurance: 12,000 - 11,000	1,000
Electricity	1,500
Discount allowed	2,000
Depreciation on furniture	200
Net profit transferred to Capital	40,300
Total	60,000	Total	60,000

Expenses here total Rs 19,700. Net profit is therefore Rs 60,000 - Rs 19,700 = Rs 40,300.

Cash drawings and goods drawings do not appear as business expenses. They affect Meera’s capital instead.

Balance Sheet: show the closing financial position

Paper Trail Stationery: Balance Sheet as at 31 March 2026

Capital and liabilities	Rs	Assets	Rs
Capital: 2,00,000 + profit 40,300 - drawings 7,000	2,33,300	Furniture: 24,000 - depreciation 200	23,800
Asha Supplies, creditor	16,000	Closing stock	18,000
Outstanding salaries	1,000	Riya Stores, debtor	20,000
		Prepaid insurance	11,000
		Bank	1,11,000
		Cash	66,500
Total	2,50,300	Total	2,50,300

Independent equation check: Assets Rs 2,50,300 = Capital Rs 2,33,300 + Outside liabilities Rs 17,000.

The supplier balance is Rs 60,000 - Rs 4,000 returns - Rs 40,000 settled = Rs 16,000. Drawings total Rs 5,000 cash plus Rs 2,000 goods = Rs 7,000.

The purpose and structure of these statements, including closing transfers, are explained in NCERT’s Financial Statements I.

Complete the cycle with closing entries

If your project requires closing entries, the following transfers finish this example. All are dated 31 March and follow the four adjustment entries above.

Debit account and Rs	Credit account and Rs
Purchases Returns 4,000	Purchases 4,000
Sales 3,000	Sales Returns 3,000
Trading 76,000	Purchases 74,000; Carriage Inwards 2,000
Sales 1,17,000	Trading 1,17,000
Trading 59,000	Profit and Loss 59,000
Discount Received 1,000	Profit and Loss 1,000
Profit and Loss 19,700	Rent 6,000; Salaries 9,000; Insurance 1,000; Electricity 1,500; Discount Allowed 2,000; Depreciation 200
Profit and Loss 40,300	Capital 40,300
Capital 7,000	Drawings 7,000

The Rs 18,000 credit to Trading for closing stock was already recorded in the adjustment section. Do not post it again.

After these transfers, revenue, expense, Trading, Profit and Loss, and Drawings accounts have no balance. Assets, outside liabilities and Capital remain. A post-closing trial balance would therefore total Rs 2,50,300 on each side, using exactly the closing balances in the balance sheet.

Write a conclusion that explains the figures

A useful conclusion goes beyond saying that the accounts balance. For example:

“Paper Trail Stationery earned net profit of Rs 40,300 during March. Meera’s capital increased from Rs 2,00,000 to Rs 2,33,300 after drawings of Rs 7,000. The business ended with Rs 1,77,500 in cash and bank, but still owed Rs 16,000 to its supplier and Rs 1,000 in salaries. It also had Rs 20,000 to collect from Riya Stores.”

Then add one limitation: this is a simplified first-month illustration. Its profit does not establish how the shop would perform over a full year.

Why money left is not the same as profit

Cash and bank together are Rs 1,77,500, much larger than net profit of Rs 40,300. That does not mean the profit calculation is wrong. Meera supplied the business with capital, some cash purchased furniture, some sales remain unpaid, some purchases remain payable, and insurance includes future cover.

You can reconcile the two:

2,00,000 capital + 40,300 profit - 7,000 drawings - 23,800 furniture - 18,000 stock - 20,000 debtors - 11,000 prepaid insurance + 16,000 creditors + 1,000 outstanding salaries = Rs 1,77,500 cash and bank.

This is an accounting-equation check, not a separate cash flow statement.

Final checks before submitting your project

1. Match every transaction date and amount to its journal entry.
2. Tick both sides of every journal entry after posting to the ledger.
3. Take balances, rather than ledger-side totals, into the trial balance shown here.
4. Keep the unadjusted trial balance clearly labelled so later adjustments are not mistaken for missing postings.
5. Check that goods drawings, returns and closing stock have each affected the accounts only once in the intended way.
6. Confirm that profit statements say “for the month ended” and the balance sheet says “as at”.
7. Explain your assumptions, label specimen documents, and list the textbook sources used.

Try one final self-test: if you had forgotten the Rs 1,000 outstanding salaries adjustment, net profit would be Rs 41,300 and capital Rs 2,34,300. The balance sheet could still balance because the missing liability and overstated capital offset each other. Agreement alone would not make the project correct.

Frequently asked questions

1. How many transactions should a sole trader project contain?

Follow the number in your assignment. This model uses 20 transactions to cover capital, cash and credit trading, returns, discounts, expenses and drawings. The month-end adjustments and closing entries are additional entries, not part of those 20 transactions.

2. Can I use a fictional business for my accountancy project?

Use one if your teacher permits a hypothetical case. Clearly identify it as fictional and label any supporting invoices or vouchers as specimens. An assignment requiring fieldwork needs the specified real-business work instead.

3. Why does the project have no opening stock?

Paper Trail begins operations on 1 March with money introduced by the owner. It does not start with inventory. Its first goods arrive through March purchases, so opening stock is nil.

4. Why is furniture not debited to Purchases?

The shop uses the furniture and sells stationery. Furniture is therefore recorded as an asset in this case. The Purchases account records goods acquired for resale.

5. Why does Riya Stores still owe Rs 20,000 after full settlement?

The 14 March receipt and discount settled the earlier Rs 42,000 balance. The fresh sale on 27 March created a new Rs 20,000 debt, which remains unpaid at month-end.

6. Why is Purchases Rs 78,000 in the trial balance but Rs 74,000 in Trading?

The Rs 78,000 balance already excludes Rs 2,000 of goods drawings from purchases of Rs 80,000. Purchases returns of Rs 4,000 are still shown separately in the unadjusted trial balance. Deducting them gives net purchases of Rs 74,000 for Trading.

7. Why is depreciation only Rs 200?

Furniture costing Rs 24,000 is used for one month at a stated annual rate of 10%. The charge is Rs 24,000 x 10% x 1/12. A full year’s charge of Rs 2,400 would not fit this project’s one-month period.

8. Should I prepare both a cash book and these journal entries?

Follow the books required by your assignment. This example records everything through the journal to demonstrate posting. If you use a cash book as the original book for cash and bank transactions, do not duplicate those entries in the journal.

9. Does a matching trial balance guarantee correct final accounts?

No. For example, recording the furniture purchase as merchandise preserves equal debits and credits while misclassifying an asset. Review the nature of each transaction and the adjustments as well as checking totals.

10. Can I change the amounts to make the project my own?

Yes, if the assignment allows it, but recalculate the entire chain. Changing a credit sale affects Sales, the customer ledger, the trial balance, profit and potentially capital and assets. Keep the transaction trail intact and verify the revised figures before presenting them.