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Final Accounts PPT APT

The document discusses the preparation of final accounts which involves preparing financial statements including the balance sheet and income statement from the trial balance. It explains the key steps like preparing trading account and profit & loss account, dealing with adjustments, and presenting the financial position and performance of the business through these statements. The balance sheet presents assets, liabilities, and capital on a particular date while the income statement ascertains the net profit or loss for the period.

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Gaurav gusai
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332 views36 pages

Final Accounts PPT APT

The document discusses the preparation of final accounts which involves preparing financial statements including the balance sheet and income statement from the trial balance. It explains the key steps like preparing trading account and profit & loss account, dealing with adjustments, and presenting the financial position and performance of the business through these statements. The balance sheet presents assets, liabilities, and capital on a particular date while the income statement ascertains the net profit or loss for the period.

Uploaded by

Gaurav gusai
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Preparation of Final Accounts

Financial Statements

Financial
Are SUMMARY Statements
of detailed financial
information of an enterprise,
providing information regarding
providing information regarding
its Financial Performance and
its performance
Financial Position. and financial
position.
Journalizing
ACCOUNTING
CYCLE
Posting

Position Balancing
Statement

Trial
Income
Balance
Statement
Once Trial Balance is tallied ,
The process of preparation of Financial
Statements can start.
If
T/B fails to tally and urgency is there, it
Can be tallied by opening a
Suspense a/c. Which, later on, is
closed once errors are detected.
Financial Statements
consists of

 Balance Sheet
( Position Statement)

 Trading and Profit & Loss a/c


(Income Statement)
Balance Sheet
( Position Statement)

Statement on Financial
Position at a given date.
Exhibits:
Assets ,External Liabilities,
Capital and Reserves.
Trading a/c and Profit & Loss
a/c (Income Statement)
Trading a/c
Ascertains Gross Profit / Loss on
the basis of the matching of Selling
Prices of Goods and Services with
the Cost of Goods Sold and
Services rendered.
Profit & Loss a/c

Provides information on the Financial


Performance of the enterprise by
ascertaining the
Net Profit.
GROSS PROFIT

Equals Operating Revenue


Minus Operating Expenses.

Gross Profit Equation

GP = Sales –[ Cost of Goods Sold ]


Cost of Goods Sold
Opening Stock
+ Purchase
+ Direct expenses
– Closing Stock
[Opening Stock + Purchases +
Direct Expenses + Gross Profit]

Dr. Side of Trading a/c


[Sales + Closing Stock]

Cr. Side of Trading a/c


TRADING A/C for the year ending on…
Dr. Cr.

To O. Stock By Sales
To Purchases Less: Returns
Less: Returns By C. Stock
To Direct Exp.
To G. Profit t/f
to P&L a/c
Find out the Cost of Goods Sold
from the following information and
also the Gross Profit.
Rs.
Opening stock 15000
Purchases 150000
Sales 200000
Closing stock 18000
Direct Expenses 5000
Cost of Goods Sold
Rs.

Opening Stock 15000


+ Purchases +150000
+ Direct Expenses + 5000
- Closing stock - 18000
152000
TRADING A/C for the year ending on…
Dr. Cr.

To O. Stock 15000 By Sales 200000


To Purchases 150000 By C. Stock 20000
To Direct Exp. 5000
To G. Profit t/f
to P&L a/c 50000

220000 220000
 Gross Profit = Sales – COGS
Rs. 50000 = 200000 -150000
 Relationship Between
Gross Profit ,Sales and
COGS
 GP is 25% of COGS than
GP is 20% of Sales
 If GP is 1/3rd of COGS,
GP is 1/4th of Sales
Profit & Loss a/c
Gives the financial performance
by ascertaining the Net Profit.
Net Profit Equation
Net Profit
= Gross Profit
+ Other Incomes & Gains
- Indirect Expenses
- Losses
Dr. Side of P & L a/c
Indirect Expenses + Losses +Net
Profit
Cr. Side of p & L a/c
= Gross Profit + Other Incomes
Profit & Loss a/c for the year ending on… ..
Dr. Cr.

To Rent By Gross Profit


To Office Exp. By Interest
To Salaries By Commission
To Depreciation By Dividend
To Loss on sale By Profit on sale
of Machine of old Asset
To Bad Debts
To Net Profit
Preparation of Final Accounts
Step 1 Start with tallied Trial Balance
Step 2 Each item in T/B is to appear
only at one place. i.e. in
Trading a/c
Or
Profit & Loss a/c
Or
Balance Sheet
Step 3
Any item given as an
Adjustment
is to be checked for its effects
and then shown in the Financial
Statements.
Trial Balance On 31.03.2015
Dr. Cr. (Rs.)
Capital 20000
Stock 8000
Cash 1440
Machinery 7560
Purchases 28200
Wages 10000
Salaries 12000
Discount 500 300
Office exp. 2000
Sales 60000
Debtors /Creditors 16000 5400
85700 85700
Closing stock (31.03.2015) Rs. 3000
Trading and P &L a/c
for the year ending on 31.03.2015 .
To Stock 8000 By Sales 60000
To Purchases 28200 By Stock 3000
To Wages 10000
To GP T/f
to P & L a/c 16800 .
To Salaries 12000 By GP t/f 16800
To Discount 500 By Discount 300
To O. Exp. 2000
To Net Profit 2600 .
17100 17100
.
Adjustments
Expenses Outstanding and Prepaid
Deferred Expenses
Income Accrued and Received in Advance.
Provision for doubtful Bad Debts
Provision for Depreciation
Interest on Drawings
Interest On Capital
Abnormal Loss of Stock
Goods sent on Approval
Goods in Transit
Expenses Outstanding and
Expenses Prepaid

Outstanding Prepaid
Expenses of the Expenses paid
Current year in advance.
not paid.

Liability Asset
Income Accrued and
Received in Advance.
Income Accrued
Income of the Current year not received,
thus an Asset

 Received in Advance.
Income of the next year received in
Current year, thus a Liability
Bad debts
• Recording of • Transferring
Bad Debts of Bad debts
Bad debts a/c Dr.
To Debtors a/c
P & L a/c Dr.
Or
To Bad debts a/c
Pro. for Bad debts
a/c Dr.
To Bad debts a/c
Provision for doubtful Debts

Adjustment for loss due to non


payment by Customers .

P & L a/c Dr.


To Provision for Doubtful Debt a/c

It reduces the Debtors when


actual loss occurs.
Depreciation
Recording Depreciation
Depreciation a/c Dr.
To Asset a/c
Transferring of Depreciation
P & L a/c Dr.
To Depreciation a/c
Or
Provision for Depreciation a/c Dr.
To Depreciation a/c
Goods Sent on Approval
Treated as goods lying with Costumer.
Adjustment
Sales a/c Dr. With
To Customer a/c Invoice Price

Stock with customer a/c Dr. Cost


To Trading a/c Price
Goods in Transit
Refers to goods purchased but not received
during the accounting period.
Goods in Transit a/c Dr.
To Trading a/c
Show on
 the Credit side of Trading a/c
 Asset side of Balance Sheet
Balance Sheet
A statement giving details of the
Assets, External Liabilities, Capital
and Reserves of an enterprise on
a particular date.

Why Prepare B/S ?

To ascertain Assets and Liabilities.


To assess the Financial Solvency.
Format of Balance Sheet
Liabilities Assets
Current Liabilities Current Assets:
Payables Cash & securities
Short-term debt Receivables
Long-term Liabilities Inventories
Shareholders' equity Fixed Assets:
Tangible assets
Intangible assets
Grouping & Marshalling
Grouping Marshalling
Putting together Order in which
items of similar Assets and
nature under Liabilities are
common heading . shown in Balance
Example: Sheet
Trade Debtors Liquidity
Permanence
Balance Sheet as on 31.03.2015
Liabilities Assets Rs.

Capital 20000 Cash 1440


+N. Profit 2600 Stock 3000
Creditors 5400 Debtors 16000
Machinery 7560
________________________________
28000 28000
LIQUIDITY
Assets & Liabilities are arranged in order
of their Liquidity & Urgency
First Most Liquid Assets
Most Urgent Liabilities
PERMANENCE
First Least Liquid Asset e.g. Goodwill
Least Urgent Payment

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