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unit-7-final-accounts-i

Unit-7 Final Accounts I

In this unit you will learn about the basic framework of final accounts including their presentation in vertical form.

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What is a balance Sheet?

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Learning Pundits Content Team

Written on Apr 16, 2019 4:03:36 PM

  • After ascertaining the net profit or net loss by preparing the Trading and Profit and Loss Account, the final step in preparing final accounts is the preparation of Balance Sheet.
  • The purpose of Balance Sheet is to ascertain the financial position of a business i.e., to know what the business owes and what it owns on a certain date.
  • Hence it shows all assets and liabilities of the business as at the end of the accounting year.
  • You know that final accounts are prepared from the Trial Balance.
  • All items of expense and income appearing in 'Trial Balance are transferred to the Trading and Profit and Loss Account.
  • The remaining items which represent the balances of personal and real accounts are shown in the Balance Sheet.
  • The accounts showing debit balances represent assets and those showing credit balances represent liabilities.