Final Accounts

The Final Accounts are made up of three sections

1. The Trading Account
2. The Profit and Loss Account
3. The Balance Sheet.

Trading accounts
All businesses are involved in some type of trade, i.e. they buy and sell goods or services. The trading account records all the details relating to these goods or services during the previous trading period.  the purpose of a trading account is to find the gross profit or loss made by the business.

The trading period is the length of time the final accounts are prepared for, this can be quarterly, half yearly or yearly.

The trading account includes the following calculations

Sales - Sales Returns=Turnover/Net Sales

 Purchases - Purchases Returns = Net Purchases

 Opening Stock + Purchases + Carriage Inwards + Customs Duty + Manufacturing Wages

                        - Closing Stock = Cost of Sales

 Turnover/Net Sales - Cost of Sales = Gross Profit

Click here to view an example of a Trading Account

Profit and Loss Account
The Profit and Loss account records all the selling, distribution and administration expenses involved in the running of a business as well as any gains received from non-trading activity.

Gross Profit + Gains - Expenses = Net Profit

Click here to view an example of a Profit and Loss Account

Balance Sheet

The Balance Sheet is a statement of all th assets, liabilities and capital of a company on a particular date.
The Balance Sheet is divided into two parts. Each part has a number of sections which contain particular information. If the accounts have been prepared properly the two parts of the balance sheet should add up to the same amount.

Top Part of the Balance Sheet -

Fixed Assets - Working Capital = Total Net Assets

Current Asset - Current Liabilities = Working Capital

Bottom Part of the Balance Sheet -

Share Capital + Reserves + Long Term Liabilities
 = Capital Employed

Click here to view an example of a Balance Sheet