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What is final account? Definitions, Objective

Accounting is the art of recording, classifying, summarizing, analyzing, and interpreting the financial transaction of a business. Journals, ledgers, and trial balance records, classify and summarize the financial transactions respectively. But the owner of a business and other stakeholders are eager to know the operating result ( profit and loss position) and financial position ( position and capital, liabilities, and assets ) of a business. The operating result and financial position of a business are determined by preparing financial accounting.

account in laptops with calculator

The final account is an accounting process prepared at the end of the accounting year to ascertain the operating result and financial position of a business firm. It consists of a trading account, profit and loss account, and balance sheet. The trading account shows the gross profit or loss, the profit, and loss account shows the net profit or net loss, and the balance sheet is prepared to know the financial position of a firm. Final accounts are generally prepared at the end of the account peroid.

Important Definitions of Final Accounting

The final account consists of a trading account, profit and loss account, and balance sheet. The trading account shows the gross profit or gross loss, net profit or net loss is calculated from the profit and loss account and the balance sheet is prepared to know the position of assets and liabilities.

The final account is the account which is prepared at the end of a given year period to see the profit and loss position of a going concern for the period given.

In conclusion, the final account is the account that is prepared to see profit or loss position as well as the financial position of a concern for a given period of time. It consists of a trading account, profit and loss account, and balance sheet.

Objectives of Final Account

The objectives of the final account are as follows:

  1. To show the profit loss position of a concern for a given period.
  2. To reveal the financial position ( position of assets, capital, and liabilities) of a firm.
  3. To identify the direct as well as indirect sources of income of a firm.
  4. To depict the direct and indirect sources of income of a firm.
  5. To control the financial activities of the business.
  6. To fulfill the legal provision.
  7.  To summarize the financial activities of a firm to get accurate results.
The final accounting consists

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