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    Final Accounts (Financial Statements)

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    Raaghav Srinivasan
    The document discusses the key financial statements prepared by businesses at the end of an accounting period: 1. The trading account is prepared to determine gross profit or loss from business activities and transfers its balance to the profit and loss account. 2. The profit and loss account takes the trading account balance and deducts expenses to determine net profit or loss, which is then transferred to the balance sheet. 3. The balance sheet presents the company's assets, liabilities, and capital as of a certain date to depict its financial position.

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    Final Accounts (Financial Statements)

    Uploaded by

    Raaghav Srinivasan
    129 views6 pages
    The document discusses the key financial statements prepared by businesses at the end of an accounting period: 1. The trading account is prepared to determine gross profit or loss from business activities and transfers its balance to the profit and loss account. 2. The profit and loss account takes the trading account balance and deducts expenses to determine net profit or loss, which is then transferred to the balance sheet. 3. The balance sheet presents the company's assets, liabilities, and capital as of a certain date to depict its financial position.

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    CP0616_01-Aug-2011_RM01

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    The document discusses the key financial statements prepared by businesses at the end of an accounting period: 1. The trading account is prepared to determine gross profit or loss from business activities and transfers its balance to the profit and loss account. 2. The profit and loss account takes the trading account balance and deducts expenses to determine net profit or loss, which is then transferred to the balance sheet. 3. The balance sheet presents the company's assets, liabilities, and capital as of a certain date to depict its financial position.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    129 views6 pages

    Final Accounts (Financial Statements)

    Uploaded by

    Raaghav Srinivasan
    The document discusses the key financial statements prepared by businesses at the end of an accounting period: 1. The trading account is prepared to determine gross profit or loss from business activities and transfers its balance to the profit and loss account. 2. The profit and loss account takes the trading account balance and deducts expenses to determine net profit or loss, which is then transferred to the balance sheet. 3. The balance sheet presents the company's assets, liabilities, and capital as of a certain date to depict its financial position.

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    of 6

    FINAL ACCOUNTS (FINANCIAL STATEMENTS) Introduction: Every business concern will be eager to know how much profit they

    have earned from their business. At the end of each accounting period, all the ledger accounts are closed. By extracting the ledger balances, Trial balance is prepared in order to check the accuracy of the accounts. To fulfill the objective of accounting, i.e., to find out the trading results, final accounts are prepared. Final accounts At the end of each accounting period, the following accounts are prepared in a business concern. 1. Trading Account 2. Profit and Loss Account and 3. Balance Sheet. The first two accounts, Trading account and Profit and loss account are prepared to ascertain the trading results. The Balance Sheet is prepared to find out the financial position of the concern. In case of manufacturing concerns producing and selling goods will prepare Manufacturing Account prior to the Trading account. Trading Account Trading account is prepared to find out the Gross trading results. This account begins with opening stock and ends with closing stock. Net Purchases (Purchases less Returns), expenses on Purchases and other direct expenses on production such as wages, power, fuel etc., will be entered on the debit side of the Trading account. Net Sales (Sales less Returns) will be entered on the credit side of the Trading account. By closing this account, we can get either Gross Profit or Gross Loss. This balance should be transferred to Profit and Loss Account. In case of manufacturing concerns, they will prepare a Manufacturing Account in addition to Trading account, to find out the Cost of Production, which is transferred to trading account.

    Profit and Loss Account Profit and Loss Account is prepared to find out the Net trading results. Profit and loss account begins with the balance transferred from Trading account. All the indirect expenses such as Office expenses, Administrative expenses, Financial expenses (interest paid on loan), Selling expenses, Distribution expenses and other non-cash expenses like depreciation, provision for bad and doubtful debts, provision for tax etc., are entered on the debit side of the Profit and Loss Account. On the credit side of Profit and Loss account Gains and Incomes of the business are entered. By closing the profit and loss account, we can get either Net Profit or Net Loss. Net Profit should be added with the capital in the balance sheet at the end. If any Net Loss, it must be deducted from the Capital. Balance Sheet. Balance Sheet is a statement showing the financial position of a business concern. Balance sheet is not an account. So there is neither debit side nor credit side in the balance sheet. All the assets are shown on the right hand side. Capital and liabilities are shown on the left hand side. By closing this balance sheet, both the totals of the Assets and Liabilities side will get agreed. The affairs shown in the balance sheet represent on a particular day only and not for a year. The arrangement of assets and liabilities in the balance sheet is known as Marshalling of Balance Sheet. It can be arranged either in the order of Liquidity or in the order of performance.

    PROFORMA FOR FINANCIAL STATEMENTS


    A) TRADING ACCOUNT B) PROFIT AND LOSS ACCOUNT C) BALANCE SHEET A) TRADING ACCOUNT TRADING ACCOUNT FOR THE YEAR ENDED . Dr Particulars To opening Stock To Purchases Less: Purchase Returns To Direct Expenses Carriage inward Wages Freight Import duty Gas & Fuel Power Lighting Water Royalty on production Factory expenses etc. To Gross Profit c/d* TOTAL XXXX XXX Amount Rs.P. Amount Rs.P. XXXX Particulars By Sales Less Sales Returns By Closing Stock By Goods Destroyed ( by Fire/theft ) Cr. Amount Amount Rs.P. Rs.P. XXXX XXXX XXXX XXXX

    XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX

    XXXX

    By Gross Loss c/d* TOTAL

    XXXX XXXXX

    PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED. Dr Cr. Particulars Amount Amount Particulars Amount Amount Rs.P. Rs.P. Rs.P. Rs.P. To Gross Loss b/d* XXXX By Gross Profit b/d* XXXX To Management expenses By Interest Office salaries XXXX received XXXX Rent, rates and taxes\ XXXX By Discount Printing and Stationery XXXX received XXXX Postage and Telegram XXXX By Telephone charges XXXX Commission XXXX Legal charges XXXX received Audit fees XXXX By rent from XXXX Insurance XXXX tenants General Expenses XXXX By Income Office Lighting XXXX from XXXX To Financial Expenses investments Interest on capital XXXX By XXXX Interest on Loan XXXX Apprenticeship Discount allowed XXXX premium XXXX Discount on bills XXXX By Interest on To Selling and debentures Distribution By Expenses: XXXX Miscellaneous XXXX Advertising XXXX revenue Travelers salaries XXXX receipts Expenses & XXXX Commission XXXX Bad debts XXXX Godown Rent XXXX Carriage out wards XXXX By Net Loss XXXX Agents commission transferred to Export expenses Capital To Depreciation & XXXX Account Maintenance XXXX Depreciation Repairs XXXX To Extraordinary expenses Loss by fire(not covered by insurance) To Net Profit (transferred to Capital account) XXXX
    TOTAL XXXX TOTAL XXXX

    Balance sheet as on . Cr.


    LIABILITIES Capital xxxxx (+) Net Profit xxx (+) Interest On capital xxx -----xxxxx (-) Drawings xxx (-) Interest on Drawings xxx (-) Loss if any xxx ------Long term liabilities Loan on mortgage Bank loan Current Liabilities Sundry creditors Bills payable Bank overdraft Creditors for outstanding Expenses Income received in Advance(prepaid income) Amount Rs.P. ASSETS Fixed assets Plant and machinery xxxx Less Depreciation xxx Land and building Less Depreciation Furniture XXX Less : Depreciation XXX Motor van XXX Less : Depreciation XXX Trademarks Patents Goodwill
    Long term loans & Advances

    Dr.
    Amount Rs.P. xxx XXX XXX XXX XXX XXX XXX XXX

    XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX

    B) Investment at cost Government securities Bonds C) Current assets Cash in hand Cash at bank Closing stock Work in progress Loose tools Sundry Debtors XXX Less : RDB XXX Bills Receivable Prepaid expenses Accrued Income(Income earned but not received) Loans and advances(short-term) D)Miscellaneous expenditure Preliminary expenses Deferred revenues Expenses - Advertising Underwriting expenses

    XXX XXX

    XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

    XXX XXX XXX XXX

    XXXXX

    XXXXX

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