Maharashtra Board Class 11 Book Keeping and Accountancy Chapter 9 Final Accounts of a Proprietary concern PDF Download

Final Accounts Of A Proprietary Concern

Chapter 9 covers the final accounts of a sole proprietary business. This chapter teaches students how to prepare complete financial statements.

Contents

9.1 Meaning, Objectives and Importance of Final Accounts

9.2 Preparation of Trading Account

9.3 Preparation of Profit and Loss Account

9.4 Preparation of Balance Sheet

9.5 Effects of following adjustments

Closing stock

Outstanding Expenses

Prepaid Expenses

Depreciation on assets

Bad debts and R.D.D.

Discount on Debtors and Creditors

Income received in advance

Accrued Income

Goods distributed as free sample

Goods withdrawn by proprietor for Personal use

Interest on capital

Interest on Drawings

Competency Statements

Students are able to understand Meaning, Objective and Importance of Final Accounts.

Students are able to Prepare Trading A/c, Profit and Loss A/c and Balance sheet with competency.

Students are able to understand effects of adjustments.

Introduction

Accounting is considered as a scientific approach in maintaining record of business transactions. It provides a systematic accounting record to all on the financial status of the enterprise. No sooner a business transaction takes place, the accounting process starts. The process is completed by the drafting the final accounts.

9.1 A) Meaning Of Final Accounts

The primary aim of accounting is assessment of business performance for the benefit of all stakeholders such as owners, employees, suppliers, customers, financiers etc. which will also help them to form their opinions on the financial position of their business concerns. For this purpose, various accounting reports are prepared in the form of Final Accounts at the end of every financial year. In brief, Final Accounts are financial statements that validate and explain working results and financial status for a specific period of time on a particular date. It is a set of Trading Account, Profit and Loss Account and Balance Sheet. Balancing figure of Trading Account is Gross Profit or Gross Loss. In case of Profit and Loss Account the balancing figure is Net Profit or Net Loss. Whereas Balance Sheet shows financial position of assets and liabilities at a given period of time.

The basic objectives of Final Accounts is to determine Gross Profit /Gross Loss and Net Profit or Net Loss of the business during the financial year.

Final Accounts shows the true and correct financial position of business.

It informs the operating results and exact financial position of the business to the stake holders to take financial decisions.

It enables to control financial activities of business effectively.

C) Importance Of Final Accounts

Final Accounts are the basis on which management or businessmen decides business policies and take financial decisions.

Final Accounts gives a true picture of the financial status of business for the financial year.

Final Accounts are useful for accurate accounting records.

Transparency in business dealings are possible due to financial statemetnts

Final Accounts help to get a clear break-up of amounts payable to government as various taxes, e.g. Income tax, GST etc.

It is a mandatory requirement to maintain records of financial state of any business establishment.

How To Prepare Final accounts?

Every time a business transaction takes place the details of it is made in Primary books. These entries are then posted to the ledger. At the end of a financial year the ledger accounts are balanced and closing balance of each ledger account is determined. There many be a debit or credit balance. With the help of all these balances, a Trial Balance is prepared. This in turn helps in preparing Trading Account, Profit and Loss Account and Balance Sheet which is known as Final Accounts. This accounting process can be represented as follows:

Teacher's Note

Final accounts are prepared at the end of every accounting year. In India, most businesses prepare final accounts on 31st March every year, just like schools prepare annual reports.

Exam Trick

Remember the order: Trial Balance → Trading A/c → Profit & Loss A/c → Balance Sheet. Each one helps make the next one. It is like climbing stairs - one step at a time.

Points To Remember

Final accounts show profit or loss and the financial position of the business.

Trading Account finds Gross Profit or Gross Loss.

Profit and Loss Account finds Net Profit or Net Loss.

Balance Sheet shows all assets and liabilities on a specific date.

All accounts must be balanced before preparing final accounts.

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