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How will you Prepare Final Accounts?

Asked by: deepak.pv | Member Since Jan-2009 | Asked on: Jan 6th, 2009

View all questions by deepak.pv

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Answered On : Jan 20th, 2009

View all answers by mahesh.kochi

In a broad sense Final Accounts means P & L a/c and Balance SheetFirst of all preparation of Trial Balance. Trial Balance consists of Net Balances of all ledgers. If the Trial Balance is tallying we can assume the posting of entries are correct. P & L includes Revenue & Expenses, post the same to P&L. Then either Net profit / Loss will arrive. Then calculation of depreciation and taxes, the net balance will transfer to balance sheet. Balance sheet consists of Source of Fund & Application of funds (Assets & Liabilities)

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Answered On : May 4th, 2009

View all answers by hifi55

Final accounts consists of trading a/c, P&L a/c and balance sheet. All  the amounts from trial balance are taken to prepare these accounts. In Trading a/c all the transactions which are related to a factory are recorded, such as sales, purchases, wages etc. the profit in this a/c is known as gross profit and it is carried forwarded to P&L a/c. In P&L a/c all the transactions which are related to administration or office are recorded. Such as office expenses, salaries, interest on investments. The profit in this a/c after balancing is known as net profit which is added to the capital in the balance sheet. If there's loss its known as net loss and it is deducted from the capital. In balance sheet there are assets & liabilities, assets include buildings, investments, debtors etc. Liabilities include loan, creditors bills payable etc. P&L a/c shows whether a firm has earned profit or not, where as balance sheet shows us the over all position of the firm.

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