Page 146 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I Sukhpreet Kaur, Lovely Professional University

Notes Unit 12: Final Accounts

CONTENTS

Objectives
Introduction
12.1 Objectives of Preparing Final Accounts
12.2 Preparation of Final Accounts
12.3 Trading and Profit & Loss Account

12.4 Balance Sheet
12.5 Adjustment Entries
12.6 Final Accounts with Adjustments
12.7 Summary

12.8 Keywords
12.9 Self Assessment
12.10 Review Questions
12.11 Further Readings

Objectives

After studying this unit, you will be able to:

z Prepare Trading and Profit & Loss a/c
z Prepare Balance sheet
z Construct Adjustments Entries
z Prepare Final accounts with adjustments

Introduction

In the present unit, you will study about the final accounts with adjustments. After studying this

unit, you will be able to understand the trading and profi t and loss account, balance sheet and
key adjustments related to them. Every organisation prepares its final accounts after a particular

period to know its financial results and financial position. Final accounts mean profit and loss
account and the balance sheet. Profit and loss account also contains one more account, known

as trading account, and if the business is manufacturing any item or article, then Manufacturing
account is also there. All these accounts are prepared only after preparing trial balance.
12.1 Objectives of Preparing Final Accounts

You already know that final accounts are prepared at the end of a particular time period. The fi nal
accounts plays an important role for every kind of organisation. There are two main objectives

of preparing final accounts: (1) to know the operational results i.e. final accounts are prepared to
know the profi t or loss during a particular period through the profi t and loss account which is

also known as income statement, and (2) to ascertain the financial position of the business on a
particular date through the balance sheet, also known as position statement.

140 LOVELY PROFESSIONAL UNIVERSITY