Final Accounts

Presented by
•Manmeet Kaur
(110069)
•Payal Motwani
(110072)
 Definition
Final accounts refer to a set of accounts prepared
at the end of each financial year to find out the
net profit or loss incurred in the year . It helps us
to know the financial position of the business

Parts of final accounts

1)TRADING A/C
2)PROFIT AND LOSS A/C
3)BALANCE SHEET
Trading Account
TRADING ACCOUNT is a nominal account that
is prepared to find out the gross profit or
gross loss for the year on the basis of sales
and purchases of the year.
Excess of sales over cost of goods sold is
gross profit while if cost is more than the
sales, then there is a gross loss.
 Format of Trading Account
Trading Account (for the year ended………)
Particulars Amt Particulars Amt
To opening stock …… By sales (….) …….
To purchases (….) …… Less;ret. Inward(…)
….....
Less:ret.outward(….) By closing stock
To wages
….. ……..
By gross loss c/d
To carriage ……
To fuel …..
To motive power ……
To octroi ……
To gross profit
c/d
……
 Profit $ loss Account
PROFIT AND LOSS ACCOUNT is prepared to find out
the net profit or net loss at the end of the year.
All those expenses and losses, incomes and gains that
are not recorded in the trading account are recorded
in the profit and loss account. These expenses are
usually termed as indirect expenses as they are
directly not related with the acquisition of goods and
to bring them in saleable form.
Format of Profit & Loss Account
Profit & loss Account (for the year
Particulars Amt Particulars
ended………) Amt
To gross loss b/d By gross profit b/d
To salaries & wages By interest received
To rent By rent received
To repairs By commission received
To depreciation By Discount received
To audit fees By profit on sale of
To discount allowed investment
To carriage outwards By profit on sale of
assets
To advertisement
To bad debts By Misc. Income
By Net Loss transferred
To interest on loan/capital
to Capital A/C
To misc. expenses
To Net Profit transferred
to capital A/C
 Balance sheet
• BALANCE SHEET is a statement which
represents financial position of a
businees at a prescribed date.
• It can also be defined as a statement of
assets and liabilities of a business at a
particular date. It is the summary of
whole accountancy record.
 Format of balance sheet (liquidity
base)
Balance sheet (as on year ending………)
LIABILITIES AMT ASSETS AMT
Bank overdraft Cash in hand
Bills payable Cash at bank
Trade creditors Accrued income
Loans Prepaid expenses
Outstanding Stock
expenses Patents
Capital Investments
(+)net profit Fixed assets
(-)drawings Goodwill
 Format of balance sheet (fictitious base)
Balance sheet (as on year ending………)

Liabilities Amt Assets Amt

Capital Goodwill
Add: Net Profit Land
Less: Drawings Building
Reserves and Surplus Plant and Machinery
Long-term loans Furniture and Fittings
Creditors Income Accrued
Bank Overdraft Stock
Expenses outstanding Sundry debtors
Advance received Bills receivable
Bills Payable Expenses prepaid
Cash at bank
Cash in hand
 Adjustments
• All those transactions which relates
with the current financial year, but they
are not included in trial balance because
there was no record for them in the
books are treated as ADJUSTMENTS.
Outstanding
expenses
 Effects
1) Trading or Profit and loss account

particulars Amt. particulars Amt.

(dr.) (cr.)
Expenses
….. ……..
Add: o/s expense
2) Balance sheet
…..
Liabilities Amt. Assets Amt.
Outstanding ……..
expense
Prepaid expenses
 Effects
1) Trading or Profit and loss account

particulars Amt. particulars Amt.

(dr.) (cr.)
Expenses
….. ……..
Less: p/pd exp
2) Balance sheet
…..
Liabilities Amt. Assets Amt.
Prepaid
expenses
Accrued
Income
 Effects
1) Trading or Profit and loss account
particulars Amt. particulars Amt.
(dr.) (cr.)
Income
Add:-accrued
income
2) Balance sheet

Liabilities Amt. Assets Amt.

Accrued income
UNACCRUED
INCOME
 Effects
1) Trading or Profit and loss account
Expenses Amt. Incomes Amt.
(dr.) (cr.)
Income
Less:-unaccrued
income
2) Balance sheet
Liabilities Amt. Assets Amt.
Unaccrued income ……..
Bad debts
 ROUGH
Assets Amt

Debtors ….
Add : wrongly entered in creditors …….

Less: new bad debts ……

Less: provision for bad debts …….

Less: provision for discount on debtors ....

 PROFIT $ LOSS ACCOUNT
expenses Amt (DR.) Incomes Amt(CR.)
To bad debts: ......
(+)Old bad debts …...
(+)new bad debts
(+)new provision for …..
bad debts
(-)old provision

BALANCE SHEET
Liabilities amt assets amt
Debtors (…..)
(-)new bad debts
(-)new prov fr bad
debts
(-)prov fr discount
Loss of stock by
fire
Effects (if goods are not insured)
Trading account
particulars Amt. particulars Amt.
(dr.) (cr.)
By loss by fire ……..

Profit $ loss account

expenses Amt. incomes Amt.

To loss by fire ……..
 Effects (if goods are insured; only a portion of claim is
received )
Trading account
Expenses Amt. Incomes Amt.
(dr.) (cr.)
By loss by fire ……..

Profit $ loss account

expenses Amt. incomes Amt.
To loss by fire ……..

Balance sheet
liabilities Amt. assets Amt.
insurance claim ……..
Practical
question
 Trading account
(for the year ending ………………)
Particulars Amt. Particulars Amt.
To opening stock 54000 By sales 165000
(-) s/r 5000
To purchase 84000
160000
(-)goods sent
(-)P/r 4000 80000
on approval 10000 150000
To wages 1000
By closing stock 61500

To freight inward (+)good sent

5000
for approval 8000 69500
To Gross Profit c/d 89500
By loss by fire 10000

229500 229500
 Profit $ loss account
(for the year ending ………………)
Particulars Amt. Particulars Amt.
To freight outward 7000
By gross profit b/d 89500
To rent 3000
(-) p/pd rent 250 2750 By discount 1000

To interest 2500 By commission recd 3000

To discount 2000 By interest 3000
To commission 4000
By rent received 4000
To office expenses 6000
To distribution exp 10000 By bad debts recovered 26450
To bad debts 5000
(+)new b.debts 5000
(+) pro for b.d 10000. 20000
To dep on plant 11000
To loss by fire 4000
To net profit (t/f
to capital a/c) 57700
126950 126950
 Balance sheet
(as on year ended ………………)
liabilities Amt. assets Amt.
Machinery 110000
Capital 170000 (-) Dep 11000 99000
(+) net profit 57700 Debtors 215000
(-) goods sent
(-) drawings 10000 204500
On approval 10000
Creditors 202000 (-) new b.d.
(-) p.b.d
5000
10000 190000
Bills payable 5600 Bills receivable 10000
Loan 20000
Bank overdraft 20000
Closing stock 61500
(+)goods on app. 8000 69500
Insurance claim (due) 6000
p/pd rent 250
Cash 50550

445300 445300