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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.

The role of accounting is to accumulate accounting data in such a manner that the amount of profit made or loss sustained during a particular period ascertained. The "final accounts" enable us to check on the conduct of the business, and to discover whether it is being run profitably. They are the means of conveying to the owner/owners, management, creditors, and interested outsiders a concise picture of profitability and financial position of the business.

The preparation of the final accounts is not the first stage of an accounting cycle but they are the final products of the accounting cycle, that is why, they are called final accounts.

These accounts summaries all the accounting information recorded in the original books of entry and the ledger consisted of hundreds of thousands of pages.

The final accounts or financial statements consists of:

  1. Trading and profit and loss account or income statement, which is prepared to know the profit earned or loss suffered by the business during a specific period.

  2. Balance sheet, which is prepared to know the financial position of the business on a particular date.

These two items or statements are collectively known as "final accounts or financial statements"

Definition and Explanation of Final Accounts
Trial Balance - A Starting Point for Final Accounts
Meanings and Sources of Revenue
Direct and Indirect Expenses
Matching Revenue and Expenses
Trading Account
Profit and Loss Account
Difference between Trading Account and Profit and Loss Account
Difference between Gross Profit and Net Profit
Balance Sheet
Difference between Trial Balance and Balance Sheet
Example of Trading and Profit and Loss Account and Balance Sheet




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