Preparation of Final Accounts - Introduction

Profit and loss account is generally considered to be of greatest interest and importance to end users of accounting information. The profit and loss account enables all concerned to find out whether the business operations have been profitable or not during a particular period. Usually the profit and loss account is accompanied by the balance sheet as on the last date of the accounting period for which the profit and loss account is prepared. A balance sheet shows the financial position of a business enterprise as of a specified moment of time. It contains a list of the assets, the liabilities and the capital of a business entity as of a specified date, usually at the close of the last day of a month or a year. While the profit and loss account is categorized as a flow report (for a particular period), the balance sheet is categorized as a status report (as on a particular date).

  Learning Objectives

 After reading this lesson the reader should be able to:

ՖՖ   Understand the Basic Ideas of Income and Expense

ՖՖ   Prepare a Profit and Loss Account/Income Statement in the Proper Format

ՖՖ   Understand the Basic Ideas About a Balance Sheet

ՖՖ   Classify the Different Assets and Liabilities

ՖՖ   Prepare a Balance Sheet in the Proper Format

  Contents

1. basic ideas about income and expense
   
2. form and presentation of profit and loss account Income statement
   
3.  explanation of items on the income statement
   
4.  statement of retained earnings
   
5. balance sheet
   
6. form and presentation of balance sheet
   
7. listing of items in the balance sheet
   
8. classification of items in the balance sheet
   
9. summary