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Financial Accounting Mahesh Kumar Sarva, Lovely Professional University

Notes Unit 8: Financial Statements

CONTENTS
Objectives
Introduction
8.1 Meaning of Financial Statements

8.2 Objectives of Preparing Final Accounts
8.3 Capital and Revenue Expenditure and Receipt
8.3.1 Classification of Expenditures
8.3.2 Classification of Receipts

8.4 Statement of Accounting Standard (AS-9) Revenue Recognition
8.5 Final Accounts with Adjustments
8.5.1 Trading and Profit & Loss Account
8.5.2 Trading Account
8.5.3 Profit & Loss Account
8.5.4 Manufacturing Account

8.6 Balance Sheet
8.7 Summary
8.8 Keywords
8.9 Review Questions
8.10 Further Readings

Objectives

After studying this unit, you will be able to:

 Understand meaning of financial statements
 Prepare trading and profit & loss A/c
 Prepare balance sheet

 Construct adjustments entries
 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 profit & 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 & loss
account and the balance sheet. Profit & 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.

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