Final Accounts

Subject: Accountancy

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Overview

Final account is the final process of accounting. It is an accounting process, which is prepared at the end of the given period of time. This note has information about final accounts.
Final Accounts
Final Accounts
Final Accounts

The final account is the final process of accounting. Final account is prepared to show the final result of the company in a specific period. Final account is also known as financial statement.Profit and loss account and balance sheet are included in final account.Profit and loss account shows the profitability achieved during the accounting period and balance sheet reflects the composition of various assets, liabilities, and share holder's equityon the accounting period.Thus, final accounts are the combination of trading account, profit and loss account and balance sheet.

The following are the main definitions of final account: -

“Final account is the account, which is prepared at the end of the given year or period, to see the profit and loss position as well as the financial position of a going concern for the period given.” – S. Mukherjee

“Final accounts consist of trading account, profit and loss account and balance sheet. The trading account shows the gross profit or gross loss, net profit or net loss is calculated from profit and loss account and balance sheet is prepared to know the position of assets and liabilities.” – O. P. Gupta

Objectives of Final Accounts

Financial Statements of Final Accounts
Financial Statements of Final Accounts

The following are the main objectives of final accounts: -

  1. To determine gross profit and net profit of the business during the year.
  2. To present the true financial position of the business on a given date.
  3. To make effective control on financial activities of the business.
  4. To make a summary presentation of all the financial transactions.
  5. To communicate the operating results and financial position of the users.
  6. To help in making a different financial decision to the users of accounting information.
Things to remember
  • Final account is the final process of accounting. 
  • Final accounts consist of trading account, profit and loss account and balance sheet. 
  • Trading account shows gross profit or gross loss, net profit or net loss is calculated from profit and loss account and balance sheet is prepared to know the position of assets and liabilities.
  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
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final account
Questions and Answers

Final account is an accounting process, which is prepared at the end of the given period of time.

Final account is prepared to know the profit or loss and the financial position of the business.

The following are the main objectives of final accounts: -

  1. To determine gross profit and net profit of the business during the year.
  2. To present true financial position of the business on a given date.
  3. To make effective control on financial activities of the business.
  4. To make a summary presentation of all the financial transactions.
  5. To communicate the operating results and financial position of the users.
  6. To help in making a different financial decision to the users of accounting information.

Final account is the final process of accounting. It is an accounting process, which is prepared at the end of the given period of time. It is prepared to know the amount of profit or loss and financial position of the business. The amount of profit or loss of the business during the year is determined by preparing trading and profit and loss accounts. The financial position of the business on a particular date is determined by preparing the balance sheet. Thus, final accounts are the combination of trading account, profit and loss account and balance sheet.

According to S. Mukherjee,“Final account is the account, which is prepared at the end of the given year period, to see the profit and loss position as well as the financial position of a going concern for the period given.”

From the above definition, it is clear that final account is an accounting process, which is prepared at the end of the given period of time. It is prepared to know the profit or loss and financial position of the business. Final accounts are the composition of trading account, profit and loss account and balance sheet of the business organization.

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