ABSTRACT

Final accounts give an idea about the profitability and financial position of a business to its

management, owners, and other interested parties. All business transactions are first recorded
in a journal. They are then transferred to a ledger and balanced. These final tallies are
prepared for a specific period. The preparation of a final accounting is the last stage of
the accounting cycle. It determines the financial position of the business. Under this it is
compulsory to make trading account, the profit and loss account and balance sheet. The term
"final accounts" includes the trading account, the profit and loss account, and the balance
sheet. A trading account shows the results of the buying and selling of goods. This sheet is
prepared to demonstrate the difference between selling price and cost price. The trading
account is prepared to show the trading results of the business, e.g. Gross profit earned or
gross loss sustained by the business. It records the direct expenses of a business firm. The
Trading Account shows the result of buying and selling goods. In preparing this account, the
general establishment charges are ignored and only the transactions in goods are included."
This account is prepared to ascertain the net profit/loss of a business during an accounting
year and expenses of an accounting year. It records the indirect expenses of a business firm
Eg: rent, salaries, advertising exp etc. Profit and loss A/C includes expenses and losses and
income and gains which have occurred in business other than the production of goods and
services the balance statement demonstrates the financial position of a business on a specific
date. The financial position of a business is found by tabulating its assets and liabilities on a
particular date.