Accounts Project 2
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 Is Final Accounts? The accounts & accounting statements prepared by a business concern at the end of the accounting year on the basis of trial balance & additional information to ascertain profit or loss of the business done during that accounting year are collectively called final accounts. Index Page No. . Brief Overview……………………………. …… 3 2-Need & Importance of Final Accounts …………………….. 5 3. Pro Forma of Final Accounts………………………… 6 4. Bibliography …………………………………. 9 5. Thank You Note……………………………………………….. 9 Brief Overview In Final Accounts, two types of accounting statements are prepared, Viz. Trading Account: – Trading account is a part of income statement, prepared on the basis of direct expenses & direct incomes of the business concern.
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Trading account is prepared for calculating the gross profit or gross loss of a business for a given period. Debit balance of trading account 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 & only the transactions related to goods are included. ” Profit & 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 Profit & 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 –versa. ” 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. ” 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 agreed 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 different account heads, one of which is to be debited to one account & a corresponding credit is to be given to other account.
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. ssets owned & possessed by the business & liabilities owed to outsiders by the business as well as capital 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 year’s net profit with the current year’s net profit. 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….. Cr. Particulars| | Amount Rs. | Particulars| | Amount Rs. To opening stockTo purchasesLess: purchase returns/ returns OutwardsTo wagesTo carriage/carriage inwardsTo factory salariesTo import dutyTo freight To octroi & cartageTo royaltyTo works manager’s salaryTo Gross Profit c/d| xxx(-)xx| xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxXXXX | By salesLess: sales return/returns OutwardsBy goods distributed as free samples By goods destroyed by fireBy goods withdrawn by partnersBy closing stock By Gross Loss c/d| xxx(-)xx| xxxxxxxxxxxxxxxxxxXXXX| 2. Pro Forma of Profit & Loss Account: Dr. Profit & Loss Account for the year ended ………. ……….
Cr. Particulars| Amount Rs. | Particulars| Amount Rs. | To Gross loss b/d(Transferred from Trading account)To salariesTo unproductive wagesTo rentTo insuranceTo postage & telegramTo courier chargesTo printing & stationeryTo repairs & renewalsTo sundry expensesTo commission & allowanceTo advertisement expensesTo goods distributed as free samplesTo bad debtsTo provision for discount on debtorsTo sales taxTo depreciationTo loss on sale of fixed assetsTo loss on by fire/theftTo Net profit (Transferred to capital account )| xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
XXXX| By Gross Profit b/d(Transferred from Trading account)By commission received/earnedBy discount received/earnedBy interest on investmentsBy bad debts recoveredBy provision for discount on creditorsBy sundry incomesBy rent receivedBy profit on sale of assetsBy profit on sale of investmentsBy Net Loss(Transferred to capital account)| xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxXXXX| 3. Pro Forma of Balance Sheet Balance Sheet as on …… …….. Particulars| | Amount Rs. | Particulars| | Amount Rs. Capital A/cOpening Balance Add: Net Profit Less: DrawingsLess: Net LossGeneral ReserveLoan from BankOverdraft Sundry CreditorsBills PayableOutstanding ExpensesIncome received in Advance| xxx(+)xx xxx(-)xxxxx (-)xx | xxxxxxxxxxxxxxxxxxxxxxxxXXXX| GoodwillLand & BuildingsLess: DepreciationPlant & MachineryLess : DepreciationFurnitureLess: DepreciationInvestmentsSundry DebtorsLess: Bad DebtsClosing StockBills ReceivableCash in HandCash at BankIncome Receivable Prepaid Expenses| xxx(-)xxxxx(-)xxxxx(-)xxxxx(-)xx| xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxXXXX|
BIBLIOGRAPHY This project was made by taking information from the following sources: – * FYBMS – Introduction to Financial Accounts Book. * Wikipedia. com * HSC Book- Keeping & Accountancy Book 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