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» Balance Sheet

To derive the information relating to the position of the organisation from these real and personal accounts a
statement by name "Balance Sheet" is prepared.

However preparing the Balance sheet need us to think a bit beyond just listing out the information relating to
the personal and real accounts in the statement.

Debtors (Assets) and Creditors


• Assets
Real accounts and Personal accounts are capable of being called assets. Any element (account) that is capable
of being liquidated (that is capable of being converted to cash by giving it away) indicates an asset. Machinery,
Furniture, Cash, etc are real accounts that can be called assets.

» Debtors represent Assets

Debtors represent the persons and organisation who owe to the organisation. They would clear their dues by
paying out either in cash or in some other form. Thus Debtors get liquidated and as such can be called assets.

• Liabilities
All elements representing liabilities are Personal accounts. An element that is capable of being cleared by
paying out indicates a liability.

» Creditors represent Liabilities

Creditors represent the persons and organisation to whom the organisation owes. The organisation would clear
its due by paying them either in cash or in some other form. Thus creditors are cleared by paying out and as
such can be called liabilities.

final accounts
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Accounts made up only at the end of a firm's financial year. For a manufacturing firm, the final
accounts consist of (1) manufacturing account, (2)


That part of an income statement which shows how the gross (operating) profit was generated
through the firm's trading activities.

Final Account is the Balance sheet and the profit and loss account which is prepared from Trial
balance extracted from the ledger.Balance sheet reflect the position of the company as on the
date while profit and loss account gives the result of te business i.e profit or loss.There are two
sides of Balance sheet liabilities and assets liability side shows company's capital reserves loans
and creditors and asset side shows the Fixed and current assets and loans and advances

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