Final Accounts of a Company

Final Accounts Meaning

Final accounts are those accounts that are prepared by a joint stock company at the end of a fiscal year. The purpose of creating final accounts is to provide a clear picture of the financial position of the organisation to its management, owners, or any other users of such accounting information.

Final account preparation involves preparing a set of accounts and statements at the end of an accounting year. The final account consists of the following accounts:

  1. Trading and Profit and Loss Account
  2. Balance Sheet
  3. Profit and Loss Appropriation account

Objectives of Final Account preparation

Final accounts are prepared with the following objectives:

  1. To determine profit or loss incurred by a company in a given financial period
  2. To determine the financial position of the company
  3. To act as a source of information to convey the users of accounting information (owners, creditors, investors and other stakeholders) about the solvency of the company.

The format of a final account is represented as follows:

Q. Following is the Trial Balance of Rajesh Ltd., Gurgaon as on 31.12.2009.


1. Transfer Rs. 10000 to Reserve Fund.
2. Provide depreciation on building at 5%.
3. Stock on 31.12.2009 was valued at Rs. 12000.
4. Dividend at 15% on share capital is to the provided.
5. Depreciation on Plant and Machinery at 10%.

Prepare Trading, Profit and Loss Account, Profit and Loss Appropriation Account and Balance Sheet in the prescribed form.


The solution will be as follows:






The above mentioned is the concept that is explained in detail about Final Accounts for the Class 12 students. To know more, stay tuned to BYJU’S.

Important Topics in Accountancy:

Frequently Asked Questions on Final Account


What are the components of final accounts?

The components of final accounts are :

  1. Trading account
  2. Profit and loss account
  3. Profit and loss appropriation account

For manufacturing companies, a manufacturing account is prepared in addition to all the other accounts.


How many types of final accounts are there?

There are generally three types of final accounts and they are:

  1. Trading account
  2. Profit and loss account
  3. Balance sheet

What are the different stages of the final account of the company?

Different stages of final account of a company are:

  1. Prepare trial balance
  2. Adjusting the trial balance
  3. Preparing adjusted trial balance
  4. Prepare financial statements
  5. Closing the books

How do you calculate final accounts?

Final accounts can be calculated as follows:

  1. Make a list of trial balance items and adjustments
  2. Record debit items on expense side of P and L account or assets side in balance sheet
  3. Record credit items on the income side of trading P and L account or liabilities side of balance sheet.
  4. Balance the profit and loss account and determine profit or loss from the trial balance
  5. Add any profit obtained to the capital on the liabilities side of the balance sheet.
  6. Make a total of the balance sheet.

Give an example of the final account?

Profit and loss account is an example of a final account.


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