5.Final Accounts

8/7/2019 5.Final Accounts

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Final Accounts

The final accounts can be produced more often

than once a year in order to give information to the

owner(s) on how the business is progressing.However, it is customary to produce annual or

final accounts for the benefit of interested parties.

The starting point for preparing final accounts is

the trial balance prepared by the book-keeper. Allthe figures recorded on the trial balance are used

in the final accounts.


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Preparation of Final Accounts

involve:

Trading Account ( The objective is toascertain the gross profit and gross lossof an organization during an accountingperiod.)

Profit and Loss account ( To ascertainnet profit or net loss during anaccounting period)

Balance Sheet ( It shows the financialposition of the of a business by detailingthe sources of funds and utilization offunds.)


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Trading Account( Old System)

Particulars Amount Particulars Amount

To Opening Stock By sales

To Purchases

Less Purchase Return

By

Closing

StockTo Carriage Inwards

To wages

Gas, water and FuelLighting and Heating

Factory Expenses

To Gross profit c/d


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Trading Account( New SystemParticulars Rs. Rs. Rs.

Sales Less Sales return --

Opening stock

Purchases Less purchase return

Carriage

Gas Water and Fuel

Lighting and Heating

Factory expenses

Wages

Less Closing Stock

Cost of Good sold

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Prepare a Trading A/c for the

year ending on 31st

march 2007

Particular Rs Particular Rs

Purchases 300000 Sales 500000Stock(April 2006) 40000 Wages 30000

Carriage inwards 4000Returns

outwards

3000

Returns inwards 2500 Freight 5000

Stock on 31st March 2007 42000


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Trading Account( New SystemParticulars Rs. Rs. Rs.

Sales

Less Sales return

500000

2500 497500

Opening stock

Purchases

Less purchase return

Wages

Carriage Inward

Freight & Clearing charges

Less Closing Stock

Cost of Good sold

Gross Profit

300000

3000

--

--

--

--

40000

--

297000

30000

4000

5000

376000

42000

334000334000


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Profit and loss Account (Old)

Particulars Rs Rs.

Management expenses (Admin.

Salaries, Office rent and Taxes,

Telephone, stationary, Insurance, audit

fees, Legal Charges, Electricity)

By Gross profit b/d

Maintenance Expenses ( Repairs and

Depreciation)

Other Income( dis.,

Comm. Recd.)

Selling and Distribution Expenses

( Advertisement, Carriage

Outward,Bad Debts, Commission)

Non Trading Income

( Interest, rent,

dividend)

Financial expenses ( Interest ,

Discount on bills)

Abnormal gains

( Profit on investment

and sale of an \asset)

Abnormal Losses( Loss by fire, sale

of an asset)


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Profit and Loss account ( New System)

Particulars Rs Rs. Rs

Gross ProfitAdd: Other Income( Discount and Comm.Recd.)

Add: Non Trading income ( Rent, Int.and Div.)

Add: abnormal gains ( Profit on asset sales)

Less:Management Expenses

Less: Maintenance Expenses

Less: Selling and Distribution Expenses

Less: Financial expenses

Less: Abnormal Losses

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Prepare a Trading and P.&L.A/c for the year ending on 31st march

2007Particular Rs Particular Rs

Purchases 243000 Sales 289600

Stock (1st April 2006) 50000 Salaries & Wages 30000

Carriage outwards 6000 Returns outwards 3000

Bank Interest paid 2000 Printing & stationary 7000

Discount reced. 900 Discount allowed 600

Returns inwards 9600 Freight inwards 4000

Insurance Premium 600 Trade Exp 2500

Audit fees 3000Stock on 31st March

200770000


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Trading AccountParticulars Rs. Rs. Rs.

Sales

Less Sales return

289600

9600 280000

Opening stock

Purchases

Less purchase return

Freight

Less Closing Stock

Cost of Good sold

243000

3000

--

--

--

--

50000

--

240000

4000

70000

224000224000


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Profit and Loss accountParticulars Rs Rs. Rs

Gross Profit b\d

Add: Other Income( Discount Recd.)

Less:Management Expenses:

Salaries & Wages

Insurance premium

Audit Fees

Printing & Stationary

Less: Selling and Distribution Expenses:

Carriage outward

Trade Expenses

Less: Financial expenses:

Interest Paid

Discount allowed

30000

600

3000

7000

6000

2500

2000

900

40600

8500

2600

56000

900

56900


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Balance SheetRs Rs Rs

Net Asset Employed Financed By( sources):Loan

Proprietor's Capital

Add: Net Profit

Less: Drawings

Total Sources of funds

Fixed Assets:

Land, Building, Plant and Machinery, Furniture

Current Assets:

Stock, Debtors, Bills Receivable, Cash at Bank, Cash in Hand

Current Liabilities:

Creditors,Bills Payable, Outstanding Expenses

Net Current Assets (CA-CL)

Total Application of Funds (Net Assets)

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Documents

5.Final Accounts