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FINALIZE BOOKS
The most crucial function of financial accounting is to ascertain the financial position of the business and the profitability of the business. The profit and Loss Account and Trading Account show the net profit and loss of the business and the Balance Sheet shows the financial position.
Finalization of accounts means the preparation of a statement of profitability and a statement of the position of the business. Therefore, the accounts that need to be prepared are as follows:
Introduction to accounts
Finalization of accounts shows that the books of accounts have been checked and reconciled and are true, correct, and accurate.
The books of account are generally closed at the end of the year. However, it is best to test and reconcile accounts on a daily basis, such as monthly or quarterly.
Trading accounts, profit and loss accounts, and records are all included within the term “final accounts”.
Business account
The results of buying and selling products are shown in a very trading account. The purpose of this sheet is to point out the difference between damage and therefore cost price. The trading account is prepared to display the trading performance of the business, such as gross profit margin earned or gross loss incurred. In addition, it monitors the direct expenses of the company.
Opening stock, purchase returns, and direct expenses are also things that appear in accounting. Sales returns and closing stock are things that appear in the accounting system. Gain is the difference between the credit and debit sides, and vice versa.
Profit and loss account
This account is prepared to calculate the company’s net profit/loss and expenditure during a financial year. In addition, it tracks a company’s indirect costs, such as rent, salaries, and advertising. Expenses and losses, in the form of additional revenues and gains, that have occurred in businesses other than the assembly of products and services are included in the profit and loss account.
Income arising within the normal course of business, such as commissions, discounts, and other income, such as interest, dividends, and so on, appear in the method of accounting. Gain is the difference between the credit and debit sides, and vice versa.
Balance account
The record reflects the financial position of the company at a given point in time. The financial position of a company is determined by adding up its assets and liabilities on a particular date. The difference between assets and liabilities reflects the capital invested within the business and reflects the financial stability of the company.
It is now called the statement of the monetary position of the company.
Manufacturing account
This report should be prepared by manufacturing firms that convert raw materials into finished goods. It determines the value of final goods that are produced or made.
It also includes the value of raw materials consumed on account of the cost of procuring them, such as GST, duties, carriage and freight, landing charges, and insurance charges, among other things.
As the end of the year draws near, you will try to get help finalizing your accounts and submitting them to your CA for audit.