Points That Need to Be Considered While Preparing Final Account Homework Answer
This blog is written for all the accounts students. Through this blog we will talk about the various points that need to be considered while preparing final account homework answer.We know it becomes difficult to keep so many things in mind. For many students’ accounts is nothing but a nightmare. It becomes even more difficult for the students when they are unable to understand what to study and what to omit. That is why we are here to help you out with the final account. Through this blog you will be able to make a decent note for yourself that would help you in both i.e., completing your homework as well as before exam. Also at the end of the blog we will provide you with some tips that would help you to do better in accountancy.
What is final account?
Final account is a process by which the management of the firm compares the financial position of the business. The final account gives an idea about the profitability of the firm. In other words it shows how the firm is working and prepares bases by which one firm can be compared by other firm.
The final account is prepared for a particular time period which is the accounting cycle. All the transaction of a business is first recorded in the form of a journal and then the journal is transferred to ledger and finally the ledger is balanced to get the end result.
Some key account terminologies
Some of the important terms:
- Adjusting entries– There are certain entries that are not recorded in the books of account but should have been recorded. These entries are passed in the books of accounts to give a similar effect of the transaction
- Closing stock– The value of the stock at the end of the accounting period is known as the closing stock.
- Prepaid and unexpired expenses– Some expenses are paid for but their benefits area not consumed or exhausted in the current accounting period. They are known as the prepaid or unexpired expenses.
- Bad Debt recovery– These are the debts which were earlier written off but has been recovered in the current financial year.
- Depreciation– It is the fall in the value of the fixed assets due to their usage, afflux of time and obsoleted or damaged due to some accident.
- Provision for discount on debtors– There are certain amount which is set aside from the profit earned to allow discount to the debtors in the future.
What is the need for the adjustment in preparing the final account?
Every year the final account is prepared to find the financial position of the business firms. Therefore, it is necessary that all the income and expenses are properly recorded and included whether paid or not. Thus:
- Expenditure that is incurred whether paid or not should be included
- All the incomes that is earned that is received or not should be recorded
- All the expenditures of the succeeding year is excluded
- All the incomes of the succeeding years should be excluded.
These are the points that need to be considered while preparing final account homework answer.
Three main components of final accounts
There are certain points to be considered while preparing a final account homework answer. One of the most important things to remember is that, under final account there are three major accounts
- Trading account
- Profit and loss account
- Balance sheet
These are the components that should be considered while making final account. In fact, all these accounts together is said to be “final account”. Under section209, it is compulsory for the company to maintain these accounts. It is important to know each of these three types of accounts separately.
Trading account shows the list buying and selling of goods. We get the gross profit or loss from the preparation of trading account for a particular year.
Profit and loss account
It is used for ascertaining the net profit and loss for the year. It shows the difference between the cost and the selling price. The gross profit (loss) that is ascertained from the Trading account is carried forward to profit and loss account. The necessary entries are then made to reach the final net profit balance
It is made to ascertain the final position of the business. Here the assets and liabilities of the firm are recorded to ascertain the final position of the business. One of the most important points that need to be considered while preparing final account homework answer is that, if there is excess of assets over liabilities then we can conclude that capital has entered into the business and thus our business is sound. On the other hand if there is excess of liability over assets, it shows the out flow of the business capital.
The homework help
Final account itself is a vast area of accountancy. That is why we recommend you to take help from the online sites that are available. Homework helps are provided by some companies. All that you have to do is send the set of questions and they will be solving them and will send it to you.
The homework help works for all 24×7. All the deliveries are made on time. You can also seek firm assistance from them later on also. All the answers provided by them are reliable and 100% correct.