What are known as Final Accounts? Trading, profit & loss account and balance sheet, all these three together, are called as final accounts. Final result of trading is known through Profit and Loss Account. Financial position is reflected by Balance Sheet. These are, usually, prepared at the close of the year hence known as final accounts. They serve the ultimate purpose of keeping accounts. Their purpose is to investigate the consequence of various incomes and expenses during the year and the resulting profit or loss. 1. Trading and Profit and Loss A/c is prepared to find out Profit or Loss. 2. Balance Sheet is prepared to find out financial position of a  concern. Trading Account Trading refers buying and selling of goods. Trading A/c shows the result of buying and selling of goods. This account is prepared to find out the difference between the Selling prices and Cost price. Profit and Loss Account Trading account discloses Gross Profit or Gross Loss. Gross Profit is transferred to credit side of Profit and Loss A/c. Gross Loss is transferred to debit side of the Profit Loss Account. Thus Profit and Loss A/c is commenced. This Profit & Loss A/c reveals Net Profit or Net loss at a given time of accounting year. Trading Profit And Loss CMD from knoxbusiness Balance Sheet Trading A/c and Profit & Loss A/c reveals G.P. or G.L and N.P or N.L respectively; besides the Proprietor wants i. To know the total Assets invested in business ii. To know the Position of owner’s equity iii. To know the liabilities of business. Definition of Balance Sheet The Word ‘Balance Sheet’ is defined as “a Statement which sets out the Assets and Liabilities of a business firm and which serves to ascertain the financial position of the same on any particular date.” On the left hand side of this statement, the liabilities and capital are shown. On the right hand side, all the assets are shown. Therefore the two sides of the Balance sheet must always be equal. Capital arrives Assets exceeds the liabilities. BUY “ACCOUNTING CONVENTIONS AND CONCEPTS” OBJECTIVES OF BALANCE SHEET: 1. It shows accurate financial position of a firm. 2. It is a gist of various transactions at a given period. 3. It clearly indicates, whether the firm has sufficient assents to repay its liabilities. 4. The accuracy of final accounts is verified by this statement 5. It shows the profit or Loss arrived through Profit & Loss A/c. PREPARATION OF FINAL ACCOUNTS Preparation of final account is the last stage of the accounting cycle. The basic objective of every firm  maintaining the book of accounts is to find out the profit or loss in their business at the end of the year. Every businessman wishes to find out the financial position of his business firm as a whole during the particular period. In order to accomplish the objectives for the firm, it is essential to prepare final accounts which include Trading, Profit and Loss Account and Balance Sheet. It is mandatory that final accounts have to be prepared, every year, in every business. Trading and profit & loss accounts are prepared, after all the accounts have been completely written and trial balance is extracted. Before preparing final accounts, it becomes obligatory  to scritinize whether all the expenses and incomes for the year for which accounts are prepared have been duly provided for and included in the accounts. Form of Final Accounts: There is a standard format of final accounts only in the case of a limited company. There is no fixed prescribed format of financial accounts in the case of a proprietary concern and partnership...

Double Entry System of Book Keeping Accounting is not to be feared Accounting is a subject that is intertwined with our day-to-day lives yet people think it is quite a complicated subject to deal with. The fancy of the subject is such, that many of us fail to understand that it is quite simple, un-complicated and all it talks about is balance. Rather than barging into equations that make us grip with fear, let us start with the basic question of WHAT=WHO? “What” deals with whatever we have in hand or otherwise ASSETS and “Who” deals with the claims, both other’s claims and our own claims on the product we have in hand. Other people’s claims are known as LIABILITIES and our own claim on the product is called Owner’s equity. Now if we take “WHAT=WHO”, it can be translated into the following equation ASSETS= LIABILITIES+OWNER’S EQUITY Accounting: Get Hired Without Work Experience UNDERSTAND WHAT = WHO What = Who Stuff = Who Assets = Who Assets = Who Has Claim Assets = Claims Assets = Other People’s Claims + My Claims Assets = Liabilities + My Claims Assets = Liabilities + My Equity Assets = Liabilities + Owner’s Equity Simple Equation to Remember There are two types of claims: other people’s claims and my claims. Assets = Other People’s Claims + My Claims Claims are also referred to as equities. Assets = Other People’s Equities + My Equity. Accountants have a fancy word for other people’s equities. These are known as liabilities. Assets = Liabilities + My Equity Because I am the owner, we will call My Equity Owner’s Equity. Assets = Liabilities + Owner’s Equity This is the formal equation of accounting. The structure of accounting is based on this one perspective. Accounting students memorize it. And try to decipher it. You are way ahead of the game because you understand that what = who! WHAT ARE ASSETS AND LIABILITIES Assets are on the left of the Big T. Asset accounts increase with debits. Liabilities and Owner’s Equity are on the right of the Big T. They increase with credits. Income ultimately increases owner’s equity so it behaves like owner’s equity: it increases with a credit. Expenses increase with debits. The best way to improve your expertise in accounting procedure is to practice; in due course your hand movement and thought process start synchronizing. Examples of Asset accounts – Vehicles, Furniture, Cash Examples of Liabilities accounts- Accounts payable, Owner’s equity Purchasing a TV- Example ASSETS (what) =  LIABILITIES + OWNER’S EQUITY (who) Say if you invest Rs.5,000 as down payment from your end and take a loan of Rs.20,000 from the bank to purchase the product. Now, the bank has a claim on your asset to the extent of Rs.20,000 and your claim is Rs.5000. Here liability is Rs.20,000 and Owner’s equity is Rs.5,000. On the asset side we have a TV worth Rs.25,000 You can see that the value of the asset is equal to the value of liabilities, i.e., what = who. ASSETS = LIABILITIES + OWNER’S EQUITY 25,000    =       20,000    +     5,000 Just how you see a hand with five fingered palm on one side and five fingered nails on the other side, this accounting equation has two different perspectives to strike a balance between assets and liabilities. The Big Balancing ‘T’ The Big Balancing ‘T’ BIG “T” FOR PRODUCT  PURCHASE WHAT (ASSET) VEHICLES (Rs.25,000)  = WHO (LIABILITIES) ACCOUNTS PAYABLE (Rs.20,000) +  PAID IN CAPITAL (Rs.5,000)    Do I Debit or Credit? When we receive cash for completing a consulting job we know that cash has increased so we debit cash. The corresponding account...