final account

Final account

                                        Chapter # 4

What are final accounts?

Final account Consist of Trading and Profit and Loss Account which finally show the profit and loss for a particular period and Balance Sheet which show financial position for a particular date.

What is profit and loss account or income statement?

A statement which shows the financial position of a business for a particular period

What is balance sheet?

A statement which shows the financial position of a business on a particular date

Trading Profit and Loss Account

            Trading Account

            Profit and Loss Account

What do you understand by direct expenses?

Expenses connected with purchases of goods or to bring the goods in saleable condition are called direct expenses e.g Wages, carriage inward.

What do you understand by indirect expenses?

All these expenses which have no concern with purchases of goods or to bring the good in saleable condition are known as indirect expenses salaries, carriage outward.

Define gross profit/Gross Loss, Net Profit and Net Loss?

• Gross Profit means Excess of Sales over cost of goods sold.
• Gross Loss Means Excess of Cost of Goods Sold over Sales
• Net Profit Excess of gross profit over all indirect expenses
• Net Loss Excess of Indirect expenses over gross profit.

Define the closing entries?

The journal entries made for the purpose of closing the temporary account called closing entries.

What are adjusting entries?

The entry at the end of the period to record internal transactions are called adjusting entries.

What are assets?

All Economic resources of business are called assets of business e.g. Building, Land, Debtors

Define liabilities?

Any kind of debts of business are liabilities e.g Accounts Payable, Creditor, bank overdraft

Trading account

Opening stock	Sales Less sales return
Purchase Less Purchases return	Closing stock
Carriage inward
Cartage
Dock charges
Wagers
Custom, Import, Export, Excises and Octroi duty
Freight inward
Clearing charges
Store consumed
Motive power
Royalty
Manufacturing expenses
Gross profit (if Cr is greater then Dr)	Gross Loss (if Dr is greater then Cr)

Carriage inward

Carriage means conveyance charges incurred to bring the good in the shop by road.

Dock Charges

These are the charges paid when ship left the port.

Freight inward

Conveyance Charges incurred to bring the good in the shop by sea, Railway, Airplane.

Custom duty

A tax levied imports of good from one country to other country.

Excise duty

It is a tax imposed by government of production of goods.

Octori duty

It is a tax imposed on bringing goods to certain town or cities.

Store consumed

This includes the items like lubrication oil, grease and cotton required for running of business.

Motive power

Any source of energy used to produce motion in machinery e.g. cock gas, water electricity energy

Royalty

Royalty is an amount paid to a person for exploiting rights possessed by him.

Manufacturing expenses

This includes factory rent, factory insurance and factory repairs.

Profit and Loss account

Gross Loss b/d	Gross profit b/d
Salaries	Interest received
Carriage outward	Discount received
Freight outward	Other/ Misc receipts
Rent and rates
Interest allowed
Misc/ other expenses
Discount allowed
Commission allowed
Insurance
Bank Charges
Legal Charges
Repairs
Advertisement
Trade expenses
Office expenses
Bad debts
Traveling expenses and Taxes

Balance sheet

Assets	Liability
Cash	Bank overdraft
Bank	Loan
Bill receivable	Bill payable
Account receivable	Account payable
Debtors	Creditors
Stock	Capital
Land and building
Plant and Machinery
Furniture and fixture
Goodwill
Patents
Trademarks
Copyrights

What is marshalling?

The term marshalling means the order in which assets and liabilities are stated on the balance sheet.

1. The order of liquidity          
2. The order of performance
3. Mixed order of arrangement          

Cash, Bank, Debtor, A/R, B/R, Stock, Investment, Land, Building, Plant, Machinery, Furniture, Fixture, Goodwill, patent, Trademark, Preliminary Expenses, Discount on issue of share,

Define the term debt?

When a customer becomes business debtor the amount due from him is called Debts

What is the bad debt?

The debts which cannot recover from the debtor are called dad debts.

What are doubtful debts?

The debts the recover or realization of which is doubtful or uncertain are known as doubtful debt.

Wasting Assets

Wasting assets are that whole value gradually reduces with usage. Like, mine

Contingent Liabilities

Liabilities that may or may not be incurred by an entity depending on the outcome of a future event such as a court case

What Depreciation

Gradually decrease in the value of fixed assets is called depreciation.

What is inventory?

Goods or merchandise on hand that is a goods remaining unsold is also called stock.

Define outstanding expenses/ Accured Expenses /Expenses Payable/Amount Due/Not Paid/Unpaid

The expenses incurred but have not been actually paid till the end of current accounting year

Define outstanding income/Accured Income/Income Receivable/ Amount Due/Not received/Un received

Income earned but has not received till the end of current accounting year

Define prepaid expense/ Paid in Advance/ Paid Upto

Expenses paid in advance before they have fallen due.

Define income received in advance/unearned income/ received in advance

Income received in advance but not earned