Final Accounts- Intro, Features, Objectives, Importance, Limitations, Preparation of Final Accounts, Trading, P&L, Balance Sheet With Adjustments.

An explanation for Final accounts and format for analytical preparation of the final accounts.

1. FINAL ACCOUNTS D r . K. SUSHMITHA Assistant professor Department of Commerce

2. Final Accounts- Introduction Final Accounts is the ultimate stage of accounting process where the different ledgers maintained in the Trial Balance (Books of Accounts) of the business organization are presented in the specified way to provide the profitability and financial position of the entity for a specified period to the stakeholders and other interested parties. These are also known as FINANCIAL STATEMENTS which are prepared. i.e., Trading Account, Statement of Profit & Loss, Balance Sheet.

3. From Trial Balance. Final Accounts include the preparation of Trading Profit & Loss account Balance Sheet as these three statements are prepared to give the final results of the business, all these are collectively called as final accounts. 

4. Features Of Final Accounts The final account is legally required for the entities. The financial accounting and preparation Financial statements are obligatory for the entities as well as getting those accounts audited. These accounts are prepared for presenting and providing the financial performance and status of the entity to the stakeholders, users, investors, promoters, etc. The presentation of comparable figures of the current period from the previous period increases the utility of the statements of accounts. It presents the accurate & fair view of the organization’s financial performance by providing accurate & full information regarding the business with proper notes and disclosures of the real facts.

5. Objectives Of Preparation Of Final Accounts 1. To ascertain the results of transactions: Final Accounts are prepared to know the profit earned or loss sustained by the business in a particular period of time. In order to determine the profit and loss of business, trading and profit and loss account or Income Statement is prepared. 2. To know the financial position of the business: Besides the determination of profit and loss, the financial position of the business is measured through final accounts. The financial position of the business is shown with the help of a balance sheet.

6. Importance Of Preparation of Final Accounts Forecasting and Preparing Budgets: Financial statement provides information regarding the weak-spots of the business so that the management can take corrective measures to remove these short comings. Financial statements help the management to make forecast and prepare budgets. Communicating with Different Parties: Final Accounts is the source for the external components like shareholders and investors to study the status of the entity and the entity’s business. Based on the entity, the investors decide whether to invest their funds in the same business industry or not. It provides the authenticated information to the public, who is the judge for the company based on who the company’s future lies. Ultimately the company aims to satisfy its consumers. Final Accounts provide just enough data and information to the users to assess the worth of the entity.

7. Limitations Of Preparation of Final Accounts   Manipulation or Window Dressing Use of Diverse Procedures Qualitative Aspect Ignored Subjectivity & Personal Bias Lack of Regular Data/Information

8. Preparation of Final Accounts of Sole trading concern . Final Accounts include the preparation of Trading Account Profit & Loss account Balance Sheet as these three statements are prepared to give the final results of the business, all these are collectively called as final accounts. 

9. Trading Account Prepared by trading concerns i.e., concerns which purchase and sell finished goods, To know the gross profit /loss. Gross profit /loss is the difference between the cost of goods sold and the proceeds of their sale. If the sale proceeds exceed the cost of goods sold ,the result is gross profit .Other wise, there is gross loss .

10. Pro forma of Trading Account

11. PROFIT AND LOSS ACCOUNT To ascertain the true profit or loss which the business has made during a particular period, it is necessary that all such expenses and incomes should be considered. Profit and Loss Account considers all such expenses and incomes and gives the net profit made or net loss suffered by a business during a particular period. All the indirect expenses and losses are shown on the debit side of the Profit and Loss Account, Where as all indirect revenue and incomes are shown on the credit side of the Profit and Loss Account

12. Pro forma of PROFIT AND LOSS ACCOUNT

13. BALANCE SHEET The last of financial statements  Shows the financial position of the business at the end of the accounting year i.e. balances of capital, liabilities & assets. Excess of assets over liabilities represent the capital and is indicative of the financial soundness of a company. The left hand side of the Balance Sheet may be viewed as description of the sources from which the business has obtained the capital with which it currently operates and the The right hand side as a description of the form in which that capital is invested on a specified date. A Balance Sheet is also described as a "Statement showing the Sources and Applications of Capital".

14. Pro forma of BALANCE SHEET

15. Final accounts Adjustments

16. Final accounts Adjustments

17. Final accounts Adjustments

18. Thank you