FINAL

ACCOUNTING
WITH
ADJUSTMENT
FINAL ACCOUNT
Final accounts is the last ladder of double entry system.
Accounts are summarised under
Trading A/c
Profit and loss A/c and
Balance Sheet taken together is known as final account
Basic condition
Prepared from trail balance
For this purpose both the side of trail
balance must tally.
Iftrail balance does not tally, suspense
account must be opened for this purpose
and put on the Dr. side or Cr. Side (side
having short total) as the case may be.
PREPARED IN THE
FOLLOWING SEQUENCE
Trading Account.

Profit and loss Account.

Balance Sheet.
TRADING ACCOUNT
Prepared by trading concerns i.e., concerns which
purchase and sell finished goods.
To know the gross profit /loss
Gross profit /loss is the difference between the
cost of goods sold and the proceeds exceed the
cost of goods sold ,the result is gross profit .
Other wise, there is gross loss.
Trading account
Dr. side Cr. side

Opening stock Sales-returns

Purchase-return Closing stock
Wages Gross loss(transfered.to
Salaries profit and loss A/c)
Carriage inward
Other direct expenses
Gross profit(transfered.to
profit and loss A/c)
Profit And Loss Account
It is prepared to know net profit/loss of business
during a particular accounting year.
Gross profit or loss is adjusted keeping in view the
indirect expense like administrative, selling and
distribution and any there expenses and incomes to
find out net profit or net loss
Profit And Loss Account
Dr. Cr.

To gross loss b/d By gross profit b/d

To Adm. expenses By other expenses
To selling &dist. expenses By net loss
To others expenses (transferred to
To net profit capital account)
(transferred to capital
account)
Balance sheet
Last process of financial statement.
Shows the financial position of the business at the end of
the accounting year i.e., balance of capital, liabilities &
assets.
All nominal account are closed by transferring these to
trading and profit &loss account.
Only personal & real accounts are left for balance sheet.
Balance sheet

Capital Fixed asset:

Add: net profit Goodwill
Less: drawing plant &machinery
Long term loans Etc.
Publics deposits Loose tools
Investments
Current liabilities: Current assets:
Unexpected Closing stock
income Prepaid expense
Short term loan Etc.
Trade creditors Cash at bank
Bank overdraft Cash in hand
Important Adjustments
in balance sheet
Closing stock
Ifclosing stock is given outside or
adjustment the trail balance will be shown
credit side of trading and asset side of
balance sheet.
Ifclosing stock inside in trading balance
will be shown on the asset side only
Outstanding expenses, expenses
due
Outstanding will be added to the concerned expense on
debit side of trading or profit and loss A/c
Other will be shown liabilities side of balance sheet
If outstanding expenses have been mentioned on trail
balance, they will be shown in liabilities side .
Prepaid expense, expenses due

Will be deducted in concerned expenses on

the side of profit and loss A/c
Others will be shown assets side.
Ifexpenses have been shown in trail
balance, they will be shown on the asset
side .
Depreciation
Itis always be shown on Dr. side of profit
and loss A/c
Others will be deducted in asset
Accrued income or income
receivable
Will be shown on credit side of P/L
accrue income will be shown assets
side in balance sheet.
Unearned income or income
received in advance
will be deducted on the credit side of
profit and loss A/c
Unearned income will be shown
liability side
Interest on capital
Shown in Dr. side of profit and loss
A/c
Added in balance sheet in capital.
Interest on drawing
Shown in Cr. Side of profit and loss A/c
Also added in drawing.
Interest on loan
Will be shown in Dr. side in profit and
loss A/c
Will also be shown liability side of
balance sheet