In this assignment I will evaluate the value of a set of final accounts for a business.
Final Account
The last step in accounting cycle is final account. It is done in order to know the progress of
a business operation overall. The final account portrays the results from operations of a
business organization and also reflects the financial condition of the business organization
during a certain period. The result is shown by profit and loss account thus indicating profit
or loss made during a specific time period. Similarly, the financial position is represented by
balance sheet showing assets and liabilities of the business organization for a certain date.
Benefits
Balance Sheet:
Balance sheets are constructed to allow a well-informed opinion of a company's risk
and return prospects.
Balance sheet is helpful in establishing the financial position of the business by
showing assets and liabilities. This way a business can determine their financial
position by showing assets and liabilities using balance sheet.
Balance sheet can also help in calculation of various ratios, which can help in better
management of business. It also can help business to improve its financial state. It
can also be used to obtain a detailed summary of business financial condition by
analysing its capital and liquidity.
It can also help in comparison of assets and liabilities on two dates to determine the
progress made by business.
Balance sheet can also help organisation to determine the amount of capital
employed in business.
Trial balance:
Trial balance ensures that the transactions recorded in the books of account identical
debit or credit account. This helps business, as they will have different column for
debit and credit. Therefore when they are checking for information it will be easier for
them to extract useful information easily.
Trial balance helps business to prepare trading, profit and loss account and balance
sheet. This helps business to find their gross profit, net income etc.
Trial balance also helps business to identify errors and mathematical accuracy. This
way business will identify any problem and will be able to amend it.
Business will be able to manage its capital and other assets according to the profit
and loss.
Trial balance also helps to make adjustments for unrecorded transaction(s).
Profit and loss account:
The importance of profit and loss account is that the accounting data can be used for some
management decisions such as:
1
Final Account
The last step in accounting cycle is final account. It is done in order to know the progress of
a business operation overall. The final account portrays the results from operations of a
business organization and also reflects the financial condition of the business organization
during a certain period. The result is shown by profit and loss account thus indicating profit
or loss made during a specific time period. Similarly, the financial position is represented by
balance sheet showing assets and liabilities of the business organization for a certain date.
Benefits
Balance Sheet:
Balance sheets are constructed to allow a well-informed opinion of a company's risk
and return prospects.
Balance sheet is helpful in establishing the financial position of the business by
showing assets and liabilities. This way a business can determine their financial
position by showing assets and liabilities using balance sheet.
Balance sheet can also help in calculation of various ratios, which can help in better
management of business. It also can help business to improve its financial state. It
can also be used to obtain a detailed summary of business financial condition by
analysing its capital and liquidity.
It can also help in comparison of assets and liabilities on two dates to determine the
progress made by business.
Balance sheet can also help organisation to determine the amount of capital
employed in business.
Trial balance:
Trial balance ensures that the transactions recorded in the books of account identical
debit or credit account. This helps business, as they will have different column for
debit and credit. Therefore when they are checking for information it will be easier for
them to extract useful information easily.
Trial balance helps business to prepare trading, profit and loss account and balance
sheet. This helps business to find their gross profit, net income etc.
Trial balance also helps business to identify errors and mathematical accuracy. This
way business will identify any problem and will be able to amend it.
Business will be able to manage its capital and other assets according to the profit
and loss.
Trial balance also helps to make adjustments for unrecorded transaction(s).
Profit and loss account:
The importance of profit and loss account is that the accounting data can be used for some
management decisions such as:
1
