Page 361 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes Self Assessment

11. Section ................... of the Companies Act governs the preparation of final account of a
company.
12. Interim dividend is declared between two...................

13. The difference between dividend received and dividend receivable is debited...................
14. 30 days after the declaration of dividend the amount of unpaid dividend is deposited in
a...................

15. Interest out of ................... may be paid u/s 208 of the Companies Act.

Task Discuss the importance of profit and loss A/c and explain the terms Gross Profit
and Net Profit.

14.3 Summary

 Final accounts include the Trading and Profit & Loss Account and Balance Sheet. Trading
and Profit and Loss Account is prepared to calculate the net profit earned by business
during a period. Balance Sheet of a business is prepared to disclose the financial picture of
the business.
 The Trading Account shows the gross profit difference of sales receipts and cost of sales.
Profit & Loss Account shows the net profit which is computed by matching the total
revenues and expenses of the business. Balance Sheet is a statement which has two sides –
Liability side and Assets side.
 According to Section 209 of the Indian Companies Act, 1956, it is compulsory for each and
every company to prepare its profit and loss account as well as Balance Sheet.

 It is also essential to maintain both the accounts in a proper form which is given in the
Schedule VI Parts (I and II) of the Companies Act.

 Final accounts of a business comprise of trading account, which shows gross profit.
 It includes profit and loss account which shows net profit.
 Then further it includes balance sheet which shows the assets and liabilities of the business
at the year end.

 The starting point for the preparation of final accounts is the summary of the information
from the accounting records contained in the book keepers trial balance.

14.4 Keywords

Gross Profit: It is calculated by comparing the sales and cost of sales. It is the excess of sales over
cost of sales.
Net Profit: It is the excess of revenues over expenses. It is depicted by P. & L. A/c.

Net Loss: Excess of expenditures over revenues is called net loss.
Trial Balance: It is the list of accounts taken from the ledger.

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