Any business flourishes with the help of profit which is the result of a proper income rate. This whole idea on profit and loss with the management techniques of any business is the part of Financial Statements. The owners and shareholders are also included in that statement. Everything about the transactions in any closing account year is recorded in a journal. That journal needs to be balanced occasionally and written in a ledger.
The financial statement or final accounts is something which determines an end to a certain period where calculation on the business outcome in that specific time period has been performed. This is how any business holder will understand the current state of that business.
There are few particular accounts included in the financial statement. They are Trading accounts, Profit accounts, Loss accounts and a balance sheet. Trading account is something where the ledger will show the gross profit or gross loss of that business by differentiating between buying raw materials and then selling price.
In the profit and loss account, the ledger will show income and expenses and after calculation the net profit or loss. In the balance sheet, a tally is prepared to position assets and liabilities of that business. After a certain time period, the calculation is made upon excess assets which is used for business purposes.
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