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 ABSTRACT

Fraudulent accounting entries have a significant negative impact among other

effects. Fraudulent reporting of financial entries leads to a loss in investor’s
confidence. It is important to note that a company’s financial statement
should contain information that is useful to investor, potential investors,
creditors and everyone who has a stake in the company. Although companies
are supposed to report true entries of their financial statements but some
companies report false financial entries. The financial statements of a
company are important to investors and other shareholders. Before making
decision on whether to invest in a company, individuals want to know about
the financial health of the company. They intend to put their money into
financial statements which are one of the tools that interested parties, outside
of the firm use to try to access an entity’s financial health. Companies are
expected to report reliable and transparent financial statements to the public.
Unfortunately some companies have been involved in reporting fraudulent
accounting entries to portray a positive outlook, especially when they are
doing badly. Sometimes even when they are doing fairly, some companies
end up reporting fraudulent results to appear better than they are.

Page 2 of 15
 CONTENTS

Serial No. Particulars Page no.

1. Introduction 4
2. Objectives 4
3. Transactions of Rajesh 5
4. Journal 6-7
5. Ledger 8-11
6. Trial Balance 12
7. Preparation of Final Accounts 13
8. Trading and Profit & Loss Account 14
9. Balance Sheet 14
10. Conclusion & Reference 15

Page 3 of 15
 INTRODUCTION

After recording the transactions in the original book of accounts, the ledger
accounts are prepared in the ledger. Then the ledger accounts are balanced according to
their nature. To ascertain the arithmetical accuracy, a trial balance is prepared.

After the preparation of trial balance, the trader wants to know the trading results
of the business. The trading results of the business mean whether the business has earned
profits or suffered losses during the accounting period. As we know that, the main
objective of business is to earn profit. Every businessman is also interested in assessing
the financial position of the business on a particular date. For this purpose , the
businessman prepares financial statements of his business i.e. the Trading and Profit and
Loss Account and Balance Sheet at the end of the accounting period. These financial
statements are popularly known as final account or financial statements.

Financial statements or final accounts, generally refer to two statement, viz. (1)
Profit and Loss Account and (2) Balance Sheet, prepared at the end of every accounting
year. The profit and loss account is prepared to ascertain the results of the business
operations, called net profit or net loss of the business for an accounting year. The
balance sheet is prepared to know the assets, liabilities and owner’s capital of a business
at the end of every accounting period. These two statements are called Final Accounts,
because they are prepared finally at the end of the trading period, and show the
financial or final results of the business.

OBJECTIVES
(i) Knowing Profitability of Business:

(ii) Knowing the Solvency of the Business:

(iii) Judging the Growth of the Business:

(iv) Judging Financial Strength of Business:

(v) Making Comparison and Selection of Appropriate Policy:

(vi) Forecasting and Preparing Budgets:

(vii) Communicating with Different Parties:

METHODOLOGY
The study expresses both description and analytical character regarding the theoretical
concept, it is descriptive. Since it interprets and analyzes the secondary data in order to
arrive at appropriate conclusion. Collection of data is blood vein for any type of project
work. The kind of data collected and the method used to collect the data is a very
important aspect of project work.

In the final accounts prepare the resources used only secondary data
collection for my convenience

Page 4 of 15
 TRANSACTIONS OF RAJESH
2013
April 1. Assets: Premises Rs.2,00,000; Delivery Van Rs.50,000; Fixtures Rs.5000 ;
Debtors- Hariharan Rs.30,000; Rajan Rs.50,000;
Cash at bank Rs.45,000; Cash in hand Rs.15,000.

Liabilities: Creditors- Jawahar Rs.1,00,000; Vikas Rs. 45,000; Telephone

expenses payable Rs. 4000; Electricity expenses payable Rs. 5000.
April 1. Paid Rent by Cheque Rs. 5000
April 2. Goods purchased on Credit from Prabhat Rs.15,000; Rajhans Rs. 8000; Passi
Rs. 7000
April 3. Goods sold on Credit to Rakesh Rs.17,000; Devender Rs.5,000; Lalit
Rs.8,000; Vijay Rs.6,000
April 4. Paid petrol expenses of delivery van Rs.5,700;
April 5. Cash drawings by Rajesh Rs.4,000;
April 7. Paid salaries for the month of March, 2013 Rs.7000
April 9. Cash Sales Rs.5000
April 11. Goods returned by Rakesh Rs.4000; Vijay Rs.1,000
April 12. Received Cheques from debtors- Hariharan Rs.20,000; Rajan Rs.40,000
April 16. Goods returned to Prabhat Rs.4,000; Rajhans Rs.1,000
April 20. Cheques issued to creditors Jhawahar Rs.50,000; Vikas Rs.10,000
April 22. Received cheques from Hariharan Rs.10,000; Rajan Rs.10,000; Rakesh
Rs.10,000; Davinder Rs.5,000
Cheques received from Rakesh and Davinder were dated May 15, 2013
April 24. Cheques from Rakesh and Davinder were got discounted from bank, paying
discount @ 10% p.a.
April 25. Received Cash from Lalit in full settlement Rs.7,800
Note : Closing Stock at shop on 30th April 2013 was Rs.78,000

Page 5 of 15
 JOURNAL
Journal is the book of prime entry where transactions are first recorded chronologically
both in debit aspect and credit aspect.

JOURNAL ENTRY

Debit Credit
Date Particulars Folio
(Rs.) (Rs.)
2013 Premises A/c Dr. 2,00,000
April 1 Delivery Van A/c Dr. 50,000
Fixtures A/c Dr. 5,000
Opening Stock A/c Dr. 75,000
Hariharan’s A/c Dr. 30,000
Rajan’s A/c Dr. 50,000
Bank A/c Dr. 45,000
Cash A/c Dr. 15,000
To Jawahar’s A/c 1,00,000
To Vikas’s A/c 45,000
To Telephone Expenses 4,000
Payable
To Electric Expenses 5,000
Payable
To Capital A/c 3,16,000
(Being balances of various assets
and liabilities brought forward
from previous year, the difference
being capital of the proprietor)
April 1 Rent A/c Dr. 5,000
To Bank A/c 5,000
(Being rent paid by cheque)
April 2 Purchases A/c Dr. 30,000
To Prabhat’s A/c 15,000
To Rajhan’s A/c 8,000
To Passi’s A/c 7,000
(Being goods purchased on
credit)
April 3 Rakesh's A/c Dr. 17,000
Davinder’s A/c Dr. 5,000
Lalit’s A/c Dr. 8,000
Vijay’s A/c Dr. 6,000 36,000
To Sales A/c
(Being goods sold on credit)
April 4 Delivery Van expenses A/c Dr. 5,700
To Cash A/c 5,700
(Being petrol expenses to D. Van
paid)
April 5 Drawings A/c Dr. 4,000
To Cash A/c 4,000
(Being cash withdrawn for
personal use)

Page 6 of 15
April 7 Salaries A/c Dr. 7,000
To Cash A/c 7,000
(Being salaries for the month of
March 2013 paid in cash)
April 9 Cash A/c Dr. 5,000
To Sales A/c 5,000
(Being goods sold on cash)
April Sales return A/c Dr. 5,000
11 To Rakesh’s A/c 4,000
To Vijay’s A/c 1,000
(Being goods returned by
customers)
April Bank A/c Dr. 60,000
12 To Hariharan’s A/c 20,000
To Rajan’s A/c 40,000
(Being cheques received)
April Prabhat's A/c Dr. 4,000
16 Rajhan’s A/c Dr. 1,000
To Purchase returns A/c 5,000
(Being goods returned to
creditors)
April Jawahar's A/c Dr. 50,000
20 Vikas’s A/c Dr. 10,000
To Bank A/c 60,000
(Being cheques issued to
creditors)
April Bank A/c Dr. 20,000
22 To Hariharan’s A/c 10,000
To Rajan’s A/c 10,000
(Being cheques received from Dr. 15,000
April debtors) Cash A/c 10,000
22 To Rakesh’s A/c 5,000
To Davinder’s A/c
(Being cheques received from
customers not yet banked)
April Bank A/c Dr. 14,833
24 Discount A/c Dr. 167
To Cash A/c 15,000

(15,000×10/100×1/12×4/3=Rs.166-
66)
(Being cheques received on 22nd
April got discounted)
April Cash A/c Dr. 7,800
25 Discount allowed A/c Dr. 200
To Lalit’s A/c 8,000
(Being cash received and
discount allowed)

Page 7 of 15
 LEDGER
Ledger is a book of secondary entry where different head of accounts are separately
maintained for detailed analysis and total estimation. Ledger is prepared after journal but
before trial balance.

Dr. CASH ACCOUNT Cr.

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Balance b/d 15,000 Apr.4 By D.van expenses A/c 5,700
Apr.9 To Sales A/c 5,000 Apr.5 By Drawings A/c 4,000
Apr.22 To Rakesh’s A/c 10,000 Apr.7 By Salaries A/c 7,000
To Davinder’s A/c 5,000 Apr.24 By Bank A/c 14,833
Apr.26 To Lalit’s A/c 7,800 By Dicount A/c 167
Apr.30 By Balance c/d 11,100
42,800 42,800
May 1 To Balance b/d 11,100

BANK ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Balance b/d 45,000 Apr.1 By Rent A/c 5,000
Apr.12 To Hariharan’s A/c 20,000 Apr.20 By Jawahar’s A/c 50,000
To Rajan’s A/c 40,000 By Vikas’s A/c 10,000
Apr.22 To Hariharan’s A/c 10,000 Apr.30 By Balance c/d 74,833
To Rajhan’s A/c 10,000
To Cash A/c 14,833

1,39,833 1,39,833
May 1 To Balance b/d 74,833

CAPITAL ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.30 To Balance c/d 3,16,000 Apr.1 By Balance b/d 3,16,000
3,16,000 3,16,000
May 1 3,16,000

HARIHARAN’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Balance b/d 30,000 Apr.12 By Bank A/c 20,000
Apr.22 By Bank A/c 10,000
30,000 30,000

RAJAN’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Balance b/d 50,000 Apr.12 By Bank A/c 40,000
Apr.22 By Bank A/c 10,000
50,000 50,000

OPENING STOCK ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Balance b/d 75,000 Apr.30 By Balance c/d 75,000
75,000 75,000
May 1 To Balance b/d 75,000

Page 8 of 15
 DELIVERY VAN ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Balance b/d 50,000 Apr.30 By Balance c/d 50,000
50,000 50,000
May 1 To Balance b/d 50,000

FIXTURE ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Balance b/d 5,000 Apr.30 By Balance c/d 5,000
5,000 5,000
May 1 To Balance b/d 5,000

PREMISES ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Balance b/d 2,00,000 Apr.30 By Balance c/d 2,00,000
2,00,000 2,00,000
May 1 To Balance b/d 2,00,000

OUTSTANDING ELECTRICITY EXPENSES ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.30 To Balance c/d 5,000 Apr.30 By Balance b/d 5,000
5,000 5,000
May 1 By Balance b/d 5,000

OUTSTANDING TELEPHONE EXPENSES ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.30 To Balance c/d 4,000 Apr.1 By Balance b/d 4,000
4,000 4,000
May 1 By Balance b/d 4,000

JAWAHAR’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.20 To Bank A/c 50,000 Apr.1 By Balance b/d 1,00,000
Apr.30 To Balance c/d 50,000
1,00,000 1,00,000
May 1 By Balance b/d 50,000

VIKAS’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.20 To Bank A/c 10,000 Apr.1 By Balance b/d 45,000
Apr.30 To Balance c/d 35,000
45,000 45,000
May 1 By Balance b/d 35,000

RENT ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.1 To Bank A/c 5,000 Apr.30 By P&L A/c 5,000
5,000 5,000

Page 9 of 15
 PURCHASES ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.2 To Prabhat’s A/c 15,000 Apr.30 By Trading A/c 30,000
To Rajhan’s A/c 8,000
To Passi’s A/c 7,000
30,000 30,000

PASSI’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.30 To Balance c/d 7,000 Apr.2 By Purchases a/c 7,000
7,000 7,000
May 1 By Balance b/d 7,000

PRABHAT’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.16 To purchase return A/c 4,000 Apr.2 By Purchases A/c 15,000
Apr.30 To Balance c/d 11,000
15,000 15,000
May 1 By Balance b/d 11,000

RAJHAN’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.16 To purchase return A/c 1,000 Apr.2 By Purchases A/c 8,000
Apr.30 To Balance c/d 7,000
8,000 8,000
May 1 By Balance b/d 7,000

RAKESH’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.3 To Sales A/c 17,000 Apr.11 By Sales Return A/c 4,000
Apr.22 By Cash A/c 10,000
Apr.30 By Balance b/d 3,000
17,000 17,000
May 1 To Balance b/d 3,000

DAVINDER’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.3 To Sales A/c 5,000 Apr.22 By Cash A/c 5,000
5,000 5,000

LALIT’S ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.3 To Sales A/c 8,000 Apr.25 By Cash A/c 7,800
By Discount A/c 200
8,000 8,000

VIJAY’S ACCOUNT

Page 10 of 15
Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)
2013 2013
Apr.3 To Sales A/c 6,000 Apr.11 By Sales Return A/c 1,000
Apr.30 By Balance c/d 5,000
6,000 6,000
May 1 To Balance b/d 5,000

SALES ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.30 To Trading A/c 41,000 Apr.3 By Rakesh’s A/c 17,000
By Davinder’s A/c 5,000
By Lalit’s A/c 8,000
By Vijay’s A/c 6,000
Apr.9 By Cash A/c 5,000
41,000 41,000

DELIVERY VAN EXPENSES ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.4 To Cash A/c 5,700 Apr.30 By P&L A/c 5,700
5,700 5,700

DRAWING ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.5 To Cash A/c 4,000 Apr.31 By Balance c/d 4,000
4,000 4,000
May 1 To Balance b/d 4,000

SALARIES ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.7 To Cash A/c 7,000 Apr.30 By P&L A/c 7,000
7,000 7,000

SALES RETURNS ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.11 To Rakesh’s A/c 4,000 Apr.30 By Trading A/c 5,000
To Vijay’s A/c 1,000
5,000 5,000

PURCHASE RETURNS ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.30 To Trading A/c 5,000 Apr.16 By Prabhat’s A/c 4,000
By Rajan’s A/c 1,000
5,000 5,000

DISCOUNT ACCOUNT

Date Particulars Amt.(Rs) Date Particulars Amt.(Rs.)

2013 2013
Apr.24 To Cash A/c 167 Apr.30 By P&L A/c 367
Apr.25 To Lalit’s A/c 200

Page 11 of 15
 367 367

TRIAL BALANCE
It is a statement prepared for a particular period to check the arithmetical accuracy of
the books of accounts. Generally, a trial balance is prepared after ledger accounts but
before final accounts. It means final account is not prepared without a trial balance. It
may be prepared monthly, quarterly, half-yearly or annually, Trial balance gives the
summary of all accounts before taking them to final account.

TRIAL BALANCE OF MR. RAJESH

as on 30th april, 2013
Balances
Accounts
Debit(Rs.) Credit(Rs.)
Cash in hand 11,000
Cash at bank 74,833
Capital Account 3,16,000
Debtors :
Rakesh 3,000
Vijay 5,000
Opening Stock 75,000
Delivery Van 50,000
Fixtures 5,000
Premises 2,00,000 5,000
Outstanding Electricity Expenses 4,000
Outstanding Telephone Expenses
Creditors : 50,000
Jawahar 11,000
Prabhat 7,000
Rajhan 7,000
Passi 35,000
Vikas 5,000
Rent 30,000
Purchases 41,000
Sales 5,700
Delivery Van Expenses 4,000
Drawings 7,000
Salaries 5,000
Sales Returns 5,000
Purchase Returns 367
Discount A/c
4,81,000 4,81,000

Page 12 of 15
 PREPARATION OF FINAL ACCOUNTS

1. TRADING ACCOUNT

Trading account is prepared for calculating the gross profit or gross loss arising or
incurred as a result of the trading activities of a business. In other worlds, it is prepared
to show the result of manufacturing, buying and selling of goods. If the amount of sales
exceeds the amount of purchases and the expenses directly connected with such
purchases, the difference is termed as gross profit. On the contrary, if the purchases, and
direct expenses exceed the sales, the difference is called gross loss. A Trading Account records
the amount of purchases of goods and also the expenses which are incurred in bringing
that commodity to a saleable state. In other words, all expenses which relate to either
purchase of raw material for manufacturing of goods are recorded in the Trading
Account. All such expenses are called ‘Direct Expenses’.

2. PROFIT AND LOSS ACCOUNT

Trading account only discloses the gross profit earned as a result of buying and selling of
goods. However, a businessman has to incur a number of expenses which are not taken
to trading account. Hence, a businessman is more interested in knowing the net profit
earned or net loss incurred during the year. As such, a Profit & Loss Account is
prepared which contains all the items of losses and gains pertaining to the accounting
period.

3. BALANCE SHEET

After ascertaining the net profit or loss of the business enterprise, the businessman would
also like to know the exact financial position of his business. For this purpose a
statement is prepared which contains all the Assets and Liabilities of the business
enterprise. The statement so prepared is called a Balance Sheet because it is a sheet of
balances of ledger accounts which are still open after the transfer of all nominal accounts
to the Trading and Profit & Loss Account. Balances of all the personal and real accounts
are grouped as assets and liabilities. Liabilities are shown on the left hand side of the
Balance Sheet and assets on the right hand side. 

Page 13 of 15
 TRADING AND PROFIT AND LOSS ACCOUNT
for the month ending 30th april, 2013
Dr. Cr.
Particulars Amt.(Rs.) Particulars Amt(Rs.)
To Opening Stock 75,000 By Sales 41,000
To Purchases 30,000 Less:Sales Return 5,000 36,000
Less:Purchase returns 5,000 25,000 By Closing Stock 78,000
To Gross Profit c/d 14,000
1,14,000 1,14,000
To Rent 5,000 By Gross Profit b/d 14,000
To Delivery Van Expenses 5,700 By Net Loss transferred to 4,067
To Salaries 7,000 capital
To Discount 367
18,067 18,067

BALANCE SHEET OF MR. RAJESH

as on 30th april, 2013
Liabilities Amt.(Rs.) Assets Amt.(Rs.)
Sundry Creditors: Cash in hand 11,100
Jawahar 50,000 Cash at bank 74,833
Prabhat 11,000 Sundry Debtors:
Rajhan 7,000 Rakesh 3,000
Passi 7,000 Vijay 5,000 8,000
Vikas 35,000 1,10,000 Closing Stock 78,000
Outstanding Expenses: Fixtures 5,000
5,000 50,000
Electricity Delivery van
4,000 2,00,000
Telephone Premises
Capital 3,16,000
Less:
Net Loss 4,067 3,07,933
Drawings 4,000 8,067
4,26,933 4,26,933

Page 14 of 15
 CONCLUSION

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 account is the last
stage of accounting cycle. It determines the financial position of the business. Under this
it is compulsory to make trading account, profit and loss account and balance sheet. Final
account is an essential practice for every enterprise to know the actual performance of
the organization. All mature organization should necessarily prepare final accounts of the
organization for the effectiveness of business organization.

REFERENCE

1. Juneja, Arora & Chawla : 2017 : Double entry book keeping

2. Sahoo, Swain : 2017 : Accounting
3. www.accountingexplanation.com
4. Journal : Indian Journal of Accounting

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