Final Accounts

Introduction to Financial Accounts

Final Accounts Project Topic: - Final Accounts Teacher: - Ms. Reshma Shaikh College: - K .C. College Class: -FYBMS Roll No: - 54 Student Name: - Shabbir Mehta

What

Accounts? Is Final inal Accounts?

The accounts & accounting statements prepared by a business concern at the end of the a ccounting year on the basis of trial balance & additional information to ascertain profit or loss of the business done during that accounting accounting year are collectively called called final accounts.

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Index Page No. 1. Brief Over view«««««««««««.««

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2-Need

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& Importance of Final Accounts ««««««««..

3. Pro Forma of Final Accounts««««««««««

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4. Bibliography «««««««««««««.

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5.Thank You Note«««««««««««««««««« ..

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Brief  Overview In Final Accounts, two types of accounting statements are prepared, Viz.

Final Accounts

Income Statement Balance Sheet

Trading Account

Profit & Loss Account

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Trading Account: - Trading account is a part of income statement, prepared on the basis of direct expenses & direct incomes of the business concern. Trading account is prepared for calculating the gross profit or gross loss of a business for a given period. Debit balance of trading a ccount indicates gross loss & credit balance shows gross profit. The balance of trading account is carried to profit & loss account. Gross profit is transferred to the credit side of P & L A/C & gross loss is shown on debit side of P & L A/C. According to J.R. Batliboi, ´The Trading Account indicates the results of buying and selling of goods. While preparing this account, the general establishment charges are ignored & o nly the transactions related  to goods are included.µ  Prof it & Loss Account: -Profit & Loss Account is a second part of income statement, prepared on the basis of indirect incomes & indirect expenses of the business concern. Profit & Loss Account is prepared to ascertain net profit earned or net loss suffered by a business concern during the accounting year. Debit balance of P & L A/C indicates net loss sustained whereas credit balance of  P & L A/C shows net profit earned in a business activity. According to Prof. R.N. Carter, ´A Prof it & Loss Account is an account into which all gains and losses are considered in order to ascertain the excess of gain over the losses or vice ²versa.µ  Balance Sheet: -the Balance Sheet is not an account but a statement showing the financial position of  a firm, as on a given date in the form of assets & liabilities. On the left hand side of the balance sheet closing balances of all types of liabilities are shown & on the right hand side closing balances of all types of assets are shown. A. Palmer, has defined the term Balance Sheet as, ´A statement on a particular date showing on one side the trader·s property & possessions & on the other hand the liabilities.µ  Trial Balance: -Trial Balance is a list of balances of various ledger accounts. It is prepared at the end of the accounting year. It includes all closing balances of various ledger accounts maintained in the book of account of a firm. Thus, Trial Balance is not an account but a statement showing the list of  balances of all ledger accounts. When Trial Balance agrees or tallies, it ensures arithmetical accuracy of accounts kept in the book of accounts. Final accounts are usually prepared on the basis of a greed trial balance. Adjustments: -Adjustments refer to the additional information relating to some items of accounts, given outside the trial balance for considering the same while preparing final accounts. Every adjustment is to be given two effects, under two di fferent account heads, one of which is to be debited to one account & a corresponding credit is to be given to other account.

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Need & Importance of Final Accounts (1)To verify and check the arithmetical accuracy of the accounts maintained by the business & thereby to detect mistakes, frauds & misappropriations, if any. (2)To ascertain gross profit earned or gross loss suffered in the business for a particular period, usually in a financial year. (3)To ascertain net profit or net loss made in the business for a particular period, usually in a financial

year. (4)To find out financial position of the business, i.e. assets owned & possessed by the business &

liabilities owed to outsiders by the business as well as ca pital investments made by the owners. (5)To determine the tax payable to the government. (6)To decide whether to continue the business or to give up the business activities or to shift over to some other business. (7)To find out the various types of expenses for comparison with the past year·s expenses. (8)To find out the opening and closing stocks of the goods. (9)To fix a reasonable price of the product by considering its manufacturing cost. (10)To find out the rate of return on the investment to ascertain the earning capacity of the partnership firm. (11)To gauge the efficiency & progress of ht firm·s business through comparison of the past few y ear·s net profit with the current year·s net profit.

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Pro Forma of Final Accounts 1. Pro Forma of Trading Account: In the books of «««. ««« &««« Dr.

Trading Account for the year ended 31st march, 20«.. Particulars

To opening stock  To purchases Less: purchase returns/ returns Outwards To wages To carriage/carriage inwards To factory salaries To import duty To freight To octroi & cartage To royalty To works manager¶s salary

To Gross Profit c/d

Amount Rs. xxx xxx (-)xx

xxx xxx xxx xxx xxx xxx xxx xxx xxx

xxx

Cr.

Particulars

By sales Less: sales return/returns Outwards By goods distributed as free samples By goods destroyed by fire By goods withdrawn by  partners By closing stock 

By Gross Loss c/d

XXXX

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Amount Rs. xxx (-)xx

xxx xxx xxx xxx xxx

xxx

XXXX

2. Pro Forma of Profit & Loss Account: Dr.

Profit & Loss Account for the year ended «««. «««. Particulars

Amount Rs.

To Gross loss b/d (Transferred from Trading account) To salaries To unproductive wages To rent To insurance To postage & telegram To courier charges To printing & stationery To repairs & renewals To sundry expenses To commission & allowance To advertisement expenses To goods distributed as free samples To bad debts To provision for discount on debtors To sales tax To depreciation To loss on sale of fixed assets To loss on by fire/theft

xxx

To Net profit (Transferred to capital account )

xxx

xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

Particulars

Amount Rs.

By Gross Profit b/d (Transferred from Trading account) By commission received/earned By discount received/earned By interest on investments By bad debts recovered By provision for discount on creditors By sundry incomes By rent received By profit on sale of assets By profit on sale of investments

xxx

By Net Loss (Transferred to capital account)

xxx

XXXX

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Cr.

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xxx xxx xxx xxx xxx xxx xxx xxx xxx

XXXX

3. Pro Forma of Balance Sheet Balance Sheet as on «« ««.. Particulars

A/c Opening Balance Add: Net Profit

Amount Rs.

Capital

Less: Drawings Less: Net Loss General Reserve Loan from Bank  Overdraft Sundry Creditors Bills Payable Outstanding Expenses Income received in Advance

xxx (+)xx xxx (-)xx xxx (-)xx

xxx xxx xxx xxx xxx xxx xxx xxx

Particulars

Goodwill Land & Buildings Less: Depreciation Plant & Machinery Less : Depreciation Furniture Less: Depreciation Investments Sundry Debtors Less: Bad Debts Closing Stock  Bills Receiva ble Cash in Hand Cash at Bank  Income Receivable Prepaid Expenses

XXXX

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Amount Rs. xxx xxx (-)xx xxx (-)xx xxx (-)xx xxx (-)xx

xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

XXXX

BIBLIOGRAPHY This project was made by taking information from the following sources: -

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FYBMS ± Introduction to Financial Accounts Book. Wikipedia.com

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HSC Book- Keeping & Accountancy Book 

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Thank You Note I would like to thank Ms. Reshma Shaikh for giving me this project. I would also like to thank my friends, parents, & teachers due to their inspirations & well Wishes

this project is a success.

I would also like to thank all those people who allowed me to learn some of their innermost Secrets.

There are no losers in losing, only losers in not wanting to win. - Jesus M. Trejo

Hope doesn't guarantee anything - hard work does. -Reggie Jackson

Sincere Thanks,

Shabbir Mehta 

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