Trading Account and Profit and Loss Account and Balance Sheet - An Example:

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Final accounts give an idea about the profitability and financial position of a business to its management, owners, and other interested parties. All business transactions are first recorded in a journal. They are then transferred to a ledger and balanced. These final tallies are prepared for a specific period. The preparation of a final accounting is the last stage of the accounting cycle.

It determines the financial position of the business. The term "final accounts" includes the trading account , the profit and loss account , and the balance sheet. Sections to of the Indian Companies Act deal with legal provisions relating to preparation and presentation of final accounts by companies.

Section deals with preparation of final accounts by companies, while section deals with the form and contents of the balance sheet and the profit and loss account.

A trading account sheet shows the results of the buying and selling of goods. This sheet is prepared to demonstrate the difference between selling price and cost price.

The trading account tally is prepared to show the trading results of the business, e. It records the direct expenses of a business firm. Batlibboi- The Trading Account shows the result of buying and selling goods. In preparing this account, the general establishment charges are ignored and only the transactions in goods are included. The profit and loss account is a statement that summarizes the revenue's and expense's of an accounting period so as to reflect the changes in various critical areas of a firm's operations.

It records the indirect expenses of a business firm. The balance statement demonstrates the financial position of a business on a specific date.

The financial position of a business is found by tabulating its assets and liabilities on a particular date. The excess of assets over liabilities represents the capital sunk into the business, and reflects the financial soundness of a company. Now its known as the statement of financial position of the company.

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