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
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40000
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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
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50000
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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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