Nature of Final Accounts

The final phase of the accounting process involves the preparation of final accounts from a trial balance with a view to ascertain: (i) net result of the business activities in terms of profit or loss for a given period, and (ii) the financial position of the business enterprise in terms of assets and liabilities on the last date of that given period.

Profit means excess of revenues over expenses; losses is the opposite of profit and financial positions means net assets or capital

These objectives can be achieved by preparing the final accounts or financial statements of the business entity. The terms final accounts is used to include a package of accounts such as: (i) trading account, (ii) profit and loss account and (iii) a balance sheet, Although balance sheet is not an account but only a statement, it is treated as a part of final accounts for all practical purposes. A manufacturing business entity, which purchases the raw materials, converts the same into semi finished or finished products and then sells them in the market, prepares a manufacturing account which shows the cost of manufacturing the finished (or semi finished) goods which is transferred to the trading account.

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