DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : N.Sambaiah
Designation : Head of the section
Branch : DCCP
Institute : Suvr and SR GPW, Etm
Year : I year
Subject : Accountancy-I
Subject Code : CCP102
Topic : Final Accounts
Duration : 50 minutes
Sub Topic : Significance of final
accounts
Teaching Aids : PPT, Animations

CCP102.121 1
Objectives of the lesson
On completion of the period, you would be
able to:

 Understand the significance of final accounts

CCP102.121 2
Main objectives of final accounts
 To find Profit and loss earned by the business
firm in an accounting period
 To know the financial position of the firm at the
end of the accounting period

CCP102.121 3
What is an accounting period
 It may be one year or an half year or a quarter
year as the case may be

CCP102.121 4
What are final accounts
 TRADING ACCOUNT
 PROFIT & LOSS ACCOUNT
 BALANCE SHEET

 Note: final accounts are prepared with the balances

available in trial balance

CCP102.121 5
What Is Trading Account
 Trading account is one of the final accounts
 Opening stock, net purchases, wages, direct
expenses are debited to the account
 Net sales and closing stock is credited to the
account
 Gross profit earned can be found in trading
account

CCP102.121 6
What Is Profit & Loss Account
 It is the one of the final accounts

 Office expenses, administrative expenses, selling

expenses are debited
 Gross profit and other incomes are credited

 Net profit earned during the year can be found

CCP102.121 7
What Is Balance Sheet
 It is statement with two columns
 All assets are entered on one side (right side)
 All liabilities including the capital are entered in
other side (left side)
 It is prepared at the end of the accounting period
 It shows the financial position of a firm

CCP102.121 8
Classification Of Business Firms
For the purpose of preparation of final accounts
firms can be divided into :

 Trading firms
 Manufacturing firms

CCP102.121 9
What Is Trading Firm
 They purchase goods and sell the same at
profit
 They prepare
1. trading account
2. profit & loss account
3. balance sheet

CCP102.121 10
What Is Manufacturing Firm
They purchase raw-materials and convert
the same into finished goods

 They prepare
1. manufacturing account
2. trading account
3. profit & loss account
4. balance sheet

CCP102.121 11
Final Accounts – Last Step
 The preparation of final accounts is last step in the
accounting period. After this new accounts are
prepared for next financial year

CCP102.121 12
Summary:
 The main objectives of final accounts are
a. to know the profit or loss of a year.
b. to know the financial position of the
firm.
For this purpose, at the end of the year , business firms
prepare Trading account, Profit and loss account and
Balance sheet.

CCP102.121 13
Quiz
1..Trading account is prepared for
a) net profit
b) gross profit.
2. Profit and loss account is prepared for
a) income tax
b) net profit
3. Balance sheet is prepared for
a) net profit
b) cash balance
c) financial position

CCP102.121 14
Frequently Asked Questions
1. What are the main objectives of final accounts?
2. What is a trading account?
3. What is a profit & loss account?
4. List the final accounts prepared by the
manufactured firms.

CCP102.121 15