1. CA - Accounts basicsFinal accounts www.winningnotes.com
2. Agenda 2 Final Accounts Adjustments Glossary Trading Account Format What more is in store
3. Final Accounts 3 Set of accounts prepared to know the final state of affairs of a business at the end of the Financial Year Final Accounts include the preparation of i) Trading and Profit and Loss Account ; and ii) Balance sheet. prepared every year for a completed period Prepared as per the basic accounting principles - keeping matching principle, double entry system and accrual concept in mind
4. Adjustments 4 To adjust the books of accounts as per the principles listed before there can be items which need to be brought into books of account at the time of preparing final accounts – These are called ADJUSTMENTS. Given below are some adjustments which can be normally required: Closing stock Outstanding expenses Prepaid Expenses / Accrued incomes Incomes received in advance Interest on capital, drawings, loan, investment Depreciation Bad Debts Provision for bad and doubtful debts etc
5. Glossary of Adjustments 5 Closing Stock - goods lying unsold in stock at the end of the financial year Outstanding expenses - incurred but not yet paid during the accounting period Prepaid expenses - which have been paid in advance Accrued Income- Income which has been earned but not received during the accounting period Advance Income- Income received during a particular accounting period for the work to be done in future period Interest on capital– Interest charged on the capital invested in the business. Where it is owner’s self capital, then a notional interest can be charged to ascertain the real profitability. Interest on drawings– When owner withdraws an amount from the business for his self use, then an interest is charged on these drawings.
6. Glossary of Adjustments 6 Depreciation - reduction in the value of fixed assets due to its use, wear and tear or the asset becoming obsolete. Bad Debts– When debtors cannot return the money they owe, this is called bad debts Provision for bad debts– To account for the potential loss that may happen in a year due to bad debts, businesses need to provide for the same. This is provided on Sundry debtors less Bad debts Discount on Bad debts- to encourage payment of bad debts, business sometime can offer discount to the debtors, though this is loss to business, it helps recover some amount from the debtors Provision for discount on creditors that can be provided by creditors, will be treated as an income for the business
8. Final Accounts what’s more 8 Journal entries Profit and Loss Account Balance sheet Making Adjustments Footnotes Questions and Exercises All India Tests
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