2. Meaning of Final Account:
The accounts which are prepared at the end of the
financial year are called as FINAL ACCOUNTS.
Final Account consists of the following:-
1)Trading account.
2)Profit and Loss account.
3)Balance sheet.

3. Trading account is a nominal account.It is a part of Profit
and Loss account.
It is generally prepared to find the gross profit or gross
loss of the business during the financial year.
Explanation of some important points:
1)Opening stock.
2)Purchases.
3)Purchase return.
4)Wages.
5)Sales.
6)Sales return.
7)Carriage inward.
8)Royalty.
9)Gross profit/loss.

4. Profit and Loss account is open with either gross profit or gross
loss b/d from trading account.
It is prepared to find out net profit or net loss of the business.
Explanation of some important points:
1)Salaries. 6)Interest.
2)Discount. 7)Bad debt.
3)Travelling expenses. 8)Depreciation.
4)Insurance. 9)Discount received.
5)Printing and Stationary. 10)Net profit/loss.

5. Balance sheet is a statement.It is not actually an
account.It is a statement showing the financial
position of the business on a particular date.It
shows all the Assets and Liabilities of the
business.It is the soul of the business.
Asset side of the balance Liability side of the balance
sheet sheet
1)Fixed Assets. 1)Fixed liability.
2)Current Assets. 2)Current liability.
3)Fictitious Assets. 3)Contingent liability.

6. Ex: Following is the trail balance of Ganesh and Shripad.
Trial balance as on 31st march 2009
Debit Balances Amount Credit Balances Amount
Opening stock 44000 Reserve for doubtful debts 2100
Building 80000 Sundry creditors 55400
Patents 10000 Bills payable 10000
Bills Receivable 28000 Sales 200000
Purchases 130000 General reserve 28000
Audit fees 6000 Capital account
Bad debts 3500 Ganesh 70000
Cash at bank 11500 Shripad 70000
Travelling expenses 4200 Outstanding salaries 2700
Wages and Salaries 12000
Sundry debtors 52000
Unproductive wages 1900
Motor car 45000
Trade expenses 2400
General expenses 1800
Rent(for 9 months) 4500
discount 1400
438200 438200

7. 1)Closing stock is valued at Rs.45000cost price
And Rs.47000 market price.
2)Bills receivable included a dishonoured bill of Rs.3000.
3)Goods of Rs.2500 were taken by shripad,
Goods worth Rs.4000 were sold on 27th march 2009,but no
entry was made In the books of accounts.
4)Write off Rs.2000 for bad debt and maintain R.D.D. at 5%
on sundry debtors.
5)Travelling expenses included personal travelling
expensesRs.800 for mr.ganesh.
6)Depreciation on building at 7.5 % p.a.

8. Mrs.Ganesh & Shripad
Trading Account
For the year ended 31st march 2009
Particulars Amt. Amt. Particulars Amt. Amt.
To opening stock 44000 By sales 200000
To purchases 130000 (+)unrecorded 4000 204000
To Wages and sales
salaries 12000 By goods taken
To Trade for personal use-
expenses 2400 shripad 2500
To gross profit 63100 By closing stock 45000
c/d
251500 251500

9. Particulars Amt. Amt. Particulars Amt. Amt.
To audit fees 6000
To Bad debts 3500 By Gross profit b/d 63100
+New bad debts 2000
+new R.D.D. 2850
↔↔↔
8350
-old R.D.D. 2100 6250
To Discount 1400
To dep.on Building 6000
To general exp. 1800
To unproductive
wages 1900
To travelling exp. 4200
-personal 800 3400
To rent 4500
+o/s 1500 6000
To net profit
transferred to
capital accounts
Ganesh 15175
Shripad 15175 30350
63100 63100

10. Liabilities Amt. Amt. Assets Amt. Amt.
Capital accounts Building 80000
Ganesh 70000 - depreciation 6000 74000
+net profit 15175 Patents 10000
↔↔↔
85175 Bills receivable 28000
-drawings (personal 800 84375 - dishonor 3000 25000
travelling)
Shripad 70000 Cash at bank 11500
+ net profit 15175 Sundry debtors 52000
↔↔↔ + dishonored bill 3000
85175 + unrecorded sales 4000
- Drawings 2500 82675 ↔↔↔
Sundry creditors 55400 59000
Bills payable 10000 - New bad debts 2000
General reserve 28000 - New R.D.D.5% 2850 54150
O/s salaries 2700 Motor car 45000
O/s Rent 1500
Closing stock 45000
264650 264650