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Definition and Explanation of Final Accounts:
Every
businessman goes into a business with the idea
of making profit, which is the reward of this
effort. He tries his best to get more and more
profit at the smallest economic cost.
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Trial Balance - A Starting Point for Final Accounts:
The trial
balance is simply a list of ledger accounts balances
at the end of an accounting period.
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Meanings and Sources of Revenue:
In common
language revenue means tax or income. But in a
business concern revenue means sales proceeds of
goods or services or it is the price of goods sold
or services rendered to the customers.
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Direct and Indirect Expenses:
Expenses
means the expired costs incurred for earning revenue
of a certain accounting period. They are the cost of
the goods and services used up in the process of
obtaining revenue.
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Matching Revenue and Expenses:
To
determine net profit for any particular accounting
period, we use the matching principle.
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Trading Account:
The
account which is prepared to determine the gross
profit or gross loss of a business concern is called
trading account. Click
here to read more.
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Profit and
Loss Account:
The
account through which annual net profit or loss of a
business is ascertained, is called profit and
loss account. Gross profit or loss of a business
is ascertained through
trading account and net profit is determined by
deducting all indirect expenses (business operating
expenses) from the gross profit through profit and
loss account. Thus profit and loss account starts
with the result provided by
trading account.
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read more.
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Difference between Trading Account and Profit and
Loss Account:
This page explains the difference between
trading account and profit and loss account.
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Difference between Gross Profit and Net Profit:
Gross
profit is ascertained by deducting cost of goods
sold (all direct expenses like purchases, carriage,
custom duty, sock charges, octroi duty etc.) from
sales.
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Balance Sheet:
Balance sheet
is a list of the accounts having debit balance or
credit balance in the ledger. On one side it shows
the accounts that have a debit balance and on the
other side the accounts that have a credit balance.
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Difference between Trial Balance and Balance Sheet:
This page explains the difference between trail
balance and balance sheet.
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Example of Trading and Profit and Loss Account and
Balance Sheet:
