AAL Final KT Prabhashwara 0756553456

Final Accounts
Final accounts are those accounts that are prepared by a joint stock company at the end of a
fiscal year. The purpose of creating final accounts is to provide a clear picture of the financial
position of the organization to its management, owners, or any other users of such accounting
information.

Final account preparation involves preparing a set of accounts and statements at the end of an
accounting year. The final account consists of the following accounts:

1. Trading and Profit and Loss Account

2. Balance Sheet
3. Profit and Loss Appropriation account!

Objectives of Final Account preparation

Final accounts are prepared with the following objectives:

1. To determine profit or loss incurred by a company in a given financial period.

2. To determine the financial position of the company
3. To act as a source of information to convey to the users of accounting information (owners, creditors,
investors and other stakeholders) about the solvency of the company.

Q1
What are the components of final accounts?
The components of final accounts are :

1. Trading account
2. Profit and loss account
3. Profit and loss appropriation account
For manufacturing companies, a manufacturing account is prepared in addition to all the other
accounts.

Q2
How many types of final accounts are there?
There are generally three types of final accounts and they are:

1. Trading account

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2. Profit and loss account

3. Balance sheet
Q3
What are the different stages of the final account of the company?
Different stages of final account of a company are:

1. Prepare trial balance

2. Adjusting the trial balance
3. Preparing adjusted trial balance
4. Prepare financial statements
Q4
How do you calculate final accounts?
Final accounts can be calculated as follows:

1. Make a list of trial balance items and adjustments

2. Record debit items on expense side of P and L account or assets side in balance sheet
3. Record credit items on the income side of trading P and L account or liabilities side of
balance sheet.
4. Balance the profit and loss account and determine profit or loss from the trial balance
5. Add any profit obtained to the capital on the liabilities side of the balance sheet.
6. Make a total of the balance sheet

Q5
Give an example of the final account?
1. Profit and loss account is an example of a final account.

Lets take a look at the format of the final accounts

1. Income statement
A statement of comprehensive income is a broad financial metric that includes all incomes and
expenses that affect a company's financial standing over a period. Shareholders and investors
mostly use this financial statement to determine a comprehensive understanding of a company's
financial health.

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Additionally, the below comprehensive Income statement also you can use.

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Income Statement

Expenses Income
Opening Stock XXXXXX sales XXXXXXX
+ Purchases XXXXXXX - sales returned -XXXXX
-Donations -XXXXX
-Pur. Returned -XXXXX
-good drawings -XXXXX
-Closing stock -XXXXXX
cost of sales XXXXXX
Gross profit c/f XXXXXXX
XXXXXXX XXXXXXX
Gross profit b/f XXXXXXXX
Administrative Other Income
Exp
Stationary XXXXX Discount Received XXXXX
Donation XXXXX
Furniture Dep. XXXXX
Equip. Dep XXXX
Electricity XXXXX
Water XXXXX
Telephone XXXXX
Rent XXXXXX
Rates XXXXX
Selling and
Distribution Exp.
M.V. Dep. XXXXX
Discount Allowed XXXXX
Financial Exp.

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Net Profit XXXXXX

XXXXXXX XXXXXXX

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2. Financial position statement

A statement of financial position is a financial statement that summarizes a company's assets (what
it owns), liabilities (what it owes), and equity (assets less liabilities) on a particular date – usually
at the end of a financial month or financial year.

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Balance Sheet⁄ Financial P.St

Liabilities Assets
Capital XXXXXX Non Cost Acc. Dep Net value
Current
Assets
+Surplus XXXXXX Motor XXXXXX (XXXXXX) XXXXXX
vehicle
-Drawings (XXXXX) Furniture XXXXXX (XXXXXX) XXXXX
Office Equ. XXXXXX (XXXXX) XXXXX
Non
Current
Liabilities

Current Current
Liabilities Assets
Acc. XXXX Closing XXXXXX
Electricity Stock
Acc. Water XXXX Stock of XXXXX
Stationery
Acc. XXXX Debtors XXXXX
Telephone
Acc. Rent XXXXX Cash XXXXXX
Balance
Creditors XXXXX Bank XXXXX
Balance
XXXXXX XXXXXX

3. Trail balance
A trial balance is a report that lists the balances of all general ledger accounts of a company at a
certain point in time. The accounts reflected on a trial balance are related to all major accounting
items, including assets, liabilities, equity, revenues, expenses, gains, and losses.

description Debt Credit

Prepaid Expenses XXX
Drawings XXX
Income tax XXX

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Closing Stock XXX

Debtors XXX
Purchases XXX
Discount Allowed XXX
Sales Return (Inwards return) XXX
Bad debt XXX
Interest (loan) XXX
Salaries and wages XXX
Motor vehicle – cost XXX
Furniture Cost XXX
Office equipment XXX
Bank Overdraft XXX
Bank charges XXX
Stationaries XXX
Water XXX
Telephone XXX

Creditors XXX
Accrued expense XXX
Sales XXX
Discount received XXX
Return outwards XXX
Payable expenses (all) XXX
All provision of depreciation XXX
All provisions of unbalanced debt XXX
XXXX XXXX

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