Page 337 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I Pooja, Lovely Professional University

Notes Unit 14: Preparation of Final Accounts

CONTENTS
Objectives
Introduction
14.1 Preparation of Final Accounts
14.1.1 Treatment of Special Items

14.1.2 Requirements of Schedule VI Concerning Profit and Loss Accounts
14.2 Preparation of Balance Sheet
14.3 Summary
14.4 Keywords
14.5 Review Questions
14.6 Further Readings

Objectives

After studying this unit, you should be able to:
 Understand meaning and preparation of final accounts
 Explain treatment of special items
 Know requirements of Schedule VI

 Understand preparation of Balance Sheet

Introduction

All business transactions are first recorded in Journal or Subsidiary Books. They are transferred
to Ledger and balanced it. The main object of keeping the books of accounts is to ascertain the
profit or loss of business and to assess the financial position of the business at the end of the year.
The object is better served if the businessman first satisfies himself that the accounts written up
during the year are correct or at least arithmetically accurate. When the transactions are recorded
under double entry system, there is a credit for every debit, when on a/c is debited; another
a/c is credited with equal amount. If a Statement is prepared with debit balances on one side and
credit balances on the other side, the totals of the two sides will be equal. Such a Statement is
called Trial Balance.

14.1 Preparation of Final Accounts

Though there is no prescribed form of Profit and Loss Account as per law, but all such information
are to be given which can help in presenting a true and fair view of the activities of the company.
According to section 211 of the Companies Act, Schedule 6 Part II (1) Every Profit and Loss
Account must disclose the result of the concerned period, and (2) Every expenses or item, which
is of debit or credit must be disclosed properly. Information relating to past year must also be
given along with the present year’s result in the form of figures.
Every profit and Loss Account is divided into two parts: (1) Profit and Loss Account, and (2)
Profit and Loss (Appropriation) Account.

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