Every company should prepared trading account, profit and loss account, profit and loss appropriation account and balance sheet at the end of accounting period. The profit and loss account is prepared to ascertain earned or loss suffered during an accounting period of time where the balance sheet is prepared to depict the financial position on a particulars date. Final account is the combination of income statement (trading and profit and loss account) and balance sheet.
Introduction
Final account is the last step involved in accounting cycle. It is maintained with a view to knowing the over result of a business operation. The final account depicts the results from operations of a business organization and also reflects the financial condition of the business organization during a certain period in other words; it is prepared to achieve overall objectives of accounting. The operation result is shown by profit and loss account thus indication profit or loss made during a period. Similarly, the financial position is depicted by balance sheet showing assets and liabilities of the business organization in a certain date.
Preparation of Final Account
The final account of a company is prepared at the end of every accounting year. The accounting year may be calendar year or otherwise. Accounting standard has prescribed the format for profit and loss balance sheet in a vertical shape. Generally, final accounts include the following:
• Trading account
• Profit and loss account
• Profit and loss appropriation and
• Balance sheet