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FINAL ACCOUNTS
PROF. PARNEETA MUDDEBIHALKAR R.J.COLLEGEGHATKOPAR(W)
INTRODUCTION
Preparation of final accounts means
to prepare TRADING A/C, PROFIT &
LOSS A/C, & BALANCE SHEET.
Preparation of final accounts is the
last step of accounting. The various
steps of accounting are as follows…
R.J.COLLEGEGHATKOPAR(
PROF. PARNEETA MUDDEBIHALKAR
W)
TRADING A/C
For the year ended 31st march
Dr. Cr.
Particulars Amt. Amt. Particulars Amt. Amt.
To opening stock XXX By sales XXX
To works XXX
manager salary
PROF. PARNEETA MUDDEBIHALKAR R.J.COLLEGEGHATKOPAR(W)
TO power, fuel, XXX
oil
TO coal, gas, XXX
water
TO royalty XXX
TO factory XXX
insurance
TO motive power XXX
TO GROSS XXX
PROFIT tr. To
profit & loss a/c
XXXX XXXX
To Travelling XXX
Exp.
To Discount XXX
To XXX
Advertisement
To Export duty XXX
To Carriage XXX
outward
To Packing XXX
charges
To Conveyance XXX
PROF. PARNEETA MUDDEBIHALKAR R.J.COLLEGEGHATKOPAR(W)
debts XXX
(+) (New) R.D.D XXX
XXX XXX
(-) (Old) R.D.D
To Provident fund
contribution XXX
To Repairs & XXX
Renewals
To Interest on XXX
capital
To Commission to XXX
partners
To Interest on XXX
partners loan
To Net Profit XXX
transfer to
partners
capital/current A/c
XXXX XXXX
R.J.COLLEGEGHATKOPAR(
PROF. PARNEETA MUDDEBIHALKAR
W)
Explanation of
Important Items
1) INDIRECT EXPENSES:- The expenses which are
not directly related to production & purchases
of goods are called as INDIRECT EXPENSES.
These expenses are recurring in nature and
debited to PROFIT & LOSS A/C. Explanation of
some of the important indirect expenses are as
follows.
R.J.COLLEGEGHATKOPAR(
PROF. PARNEETA MUDDEBIHALKAR
W)
SALARIES & WAGES:- Payment made to office staff is
treated as salaries while payment made to factory
workers is called as wages and when the item salaries
& wages are given it is treated as indirect expenses &
debited to PROFIT & LOSS A/C . It ‘WAGES & SALARIES’
are given it is treated as direct expenses & debited to
TRADING A/C.
INSURANCE:- When insurance premium is paid for
business assets, goods kept in warehouse, goods in
transit, vehicles etc. Then such premium is treated as
indirect expenses of the business & debited to PROFIT
& LOSS A/C . This premium is also paid as to protect
the assets of the business from the risk pf accidents,
fire, theft, etc.
BAD DEBTS:- The amount which is irrecoverable from
the debtor is called as BAD DEBTS. It is loss to the firm &
hence debited to PROFIT & LOSS A/C .
PROF. PARNEETA MUDDEBIHALKAR R.J.COLLEGEGHATKOPAR(W)
RESERVE FOR DOUBTFUL DEBTS:- This is the provision
made for doubtful debts. If it is given in the trial
balance it is credited to profit & loss a/c. If it is given
in adjustments then it is debited to PROFIT & LOSS
A/C . It is also deducted from debtors. The combine
effect of old R.D.D, New R.D.D, Bad Debts can be
given as shown in the format of PROFIT & LOSS A/C
DISCOUNT:- there are two types of discounts-
*Discount allowed to customers or debtors –It is
financial concession given by the firm to the
customers. Such discount is debited to PROFIT &
LOSS A/C . *Discount received- It is a discount
allowed by the firm’s creditors / suppliers. As it is a
gain to the firm, it is credited to PROFIT & LOSS A/C .
Stock of XXX
Stationery
Cash at bank XXX
Outstanding XXX
Incomes
Insurance claim XXX
receivable
Partner’s current XXX
A/C
BALANCE TRADING
SHEET A/C
(ASSETS) (CREDIT)
BALANCE
TRADING / P&L
A/C ( -DEBIT )
SHEET
(ASSET)
BALANCE
TRADING/P&L
SHEET
A/C (DEBIT +)
(LIABILITY)
P&L A/C (-
CREDIT)
4. PRE-
RECEIVED
INCOME
BALANCE SHEET
(ASSET)
PROF. PARNEETA MUDDEBIHALKAR R.J.COLLEGEGHATKOPAR(W)
• P&L A/C (Dr. + BAD DEBTS)
7.NEW BAD
DEBTS
• ASSETS ( - SUNDRY DEBTORS)
•(-SUNDRY
ASSETS
DEBTORS)
17.INSURED GOODS
DESTROYED BY FIRE
• BALANCE SHEET (ASSET CLAIM AMT)
PROFIT & LOSS (LOSS AMT)
• TRADING A/C (CREDIT )(GROSS AMT)
• BALANCE SHEET
(LIABILTY – BILLS
21.BILLS
RECEIVABLE)
PAYABLE • BALANCE SHEET
DISHONOURED (LIABILTY + SUNDRY
DEBTORS )
BALANCE
23.DEPRECIATION
SHEET (ASSET)