The primary objective of any business concern is to earn income. Ascertainment of the periodic income of a business enterprise is perhaps the important objective of the accounting process. This objective is achieved by the preparation of profit and loss account or the income statement.
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).
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
explanation of items on the income statement
statement of retained earnings