Final Accounts

FINAL ACCOUNTS

Learning Objectives ► Identify

the object of preparing the final accounts ► List the various statements/accounts which comprise final accounts ► Understand the treatment of different items in preparation of final accounts ► Appreciate the meaning and importance of different adjustment entries ► Pass appropriate adjustment entries ► Prepare Trading, Profit & Loss A/c and Balance sheet ► Explain the meaning of certain key terms

Trading Account To Opening Stock To Purchases To Freight & Hamali To Octri To Purchase Comm To Gross Profit c/f

► By

Sales ► By Closing Stock

► Trading

account gives the overall result of trading i.e. buying & selling of goods. ► It explains whether purchasing and selling goods has proved to be profitable for the business or not. ► Purchases & Sales are net-off i.e. Purchase return and sales returns are reduced respectively from purchases and sales.

► Purchase

return and sales return are shown separately in final accounts ► The Trading account takes only direct expenses incurred directly related to buying of goods. ► Trading accounts shows the gross profit earned by the business

Profit & Loss Account To Salaries To Rent Rates & Taxes To Insurance To Printing & Stationery To Telephone To Electricity To Advertisement To Discount To Interest To Bank charges To Depreciation To Net Profit

By Gross Profit b/f By Commission earned By Discount Received By Interest Earned By Bad Debts recovered