Chapter 9 Final Accounts of a Proprietary Concern
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In accountancy, Final Accounts refer to the financial
statements prepared at the end of an accounting period, typically annually, to
summarize a company's financial performance and position. These statements
provide stakeholders, such as shareholders, investors, creditors, and
management, with crucial information about the company's financial health.
The Final
Accounts typically include:
1. Income Statement (Profit and Loss
Account): This
statement shows the company's revenues, expenses, and resulting profit or loss
over the accounting period. It begins with the company's total revenues,
subtracts its total expenses, and calculates the net income or net loss.
2. Balance Sheet (Statement of Financial
Position): This
statement presents the company's financial position at a specific point in
time, typically the end of the accounting period. It lists the company's
assets, liabilities, and shareholders' equity. The balance sheet follows the
fundamental equation: Assets = Liabilities + Shareholders' Equity.
3. Cash Flow Statement:
Sometimes included in the Final Accounts, this statement shows how cash and
cash equivalents have moved in and out of the company during the accounting
period, categorized into operating, investing, and financing activities.
These Final Accounts are prepared in accordance with applicable accounting standards and regulations, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), depending on the jurisdiction and the nature of the entity. They provide valuable insights into a company's financial performance, liquidity, solvency, and overall health, aiding stakeholders in making informed decisions.