08 Nov 2020 11:28 am
An account which gives the overall preview of all trading activities of a business firm, known as Trading Account.
A part of the final account prepared by the business concern on the basis of indirect expenses and indirect incomes to ascertain net profit or net loss of the business is called Profit and Loss Account.
Balance Sheet is prepared to know the financial position of a business unit.
Final Accounts are financial statements which confirm and explain working results (profit or loss) and the financial position of a business for a specific period of time and on a particular date.
When the total of credit side of Profit and Loss Account (indirect incomes side) is greater than the debit side of Profit and Loss Account (indirect expenses side), it is known as Net Profit [Credit balance of Profit and Loss A/c].
In the Trading A/c, when total of credit side is greater than the total of debit side, it is known as Gross Profit. [Credit balance of Trading A/c]
The income which is due and supposed to be received in the accounting year, but actually not received during the accounting year, is known as Accrued Income.
The expenses which are incurred during the current accounting year, but not paid partly or fully during the current accounting year are known as Outstanding Expenses.
Continuous, gradual and permanent decrease in the value of a fixed assets due to factors like wear and tear, passage of time, etc. is known as Depreciation.
The expenses which are paid before they are not partly or fully due for payment during the current accounting year are known as Prepaid Expenses