Final Accounts At the end of every financial year, all businesses will prepare a set of final accounts These accounts enable the business to assess their performance over the year and help with planning their work for the following year.   Most businesses will prepare the following final accounts Trading Account Profit and Loss Account Statement of Financial Position These two are normally combined into one account called the Income Statement

The Trading Account This shows how much money has been made from selling your product. The profit made is known as GROSS PROFIT. (Profit before expenses are deducted from SALES REVENUE)  

The Profit & Loss Account This shows how much PROFIT has been made It starts with the GROSS PROFIT from the Trading account EXPENSES are then deducted from the Gross Profit to give the PROFIT FOR THE YEAR

Statement of Financial Position This is a statement prepared at the end of the financial year States how much the business is worth Shows what the business OWNS (ASSETS) and what the business OWES (LIABILITIES) It also shows how much EQUITY (CAPITAL) was invested in the business by the owner

Final Accounts Definitions Sales This is the money received from selling goods or services   Sales Returns This is the value of goods/services that have been returned by customers because they are faulty, damaged or simply not wanted Cost of Sales This is the cost to the business of making the sales

Final Accounts Definitions Opening Inventory (Stock) The value of stock at the start of the financial year   Purchases This is the cost of goods bought for the business to sell Purchase Returns The value of goods returned to the supplier by the business Closing Inventory (Stock) The value of stock at the end of the financial year

Final Accounts Definitions Expenses These are the costs incurred during the day to day running of the business   Profit for the Year This is the profit made after all expenses have been paid Equity (Capital) The amount of money initially invested in the business by the owner

Final Accounts Definitions Assets These are the things that the business OWNS Can be split in to CURRENT and NON-CURRENT (FIXED) Current assets change value frequently and can easily be turned in to cash. Non-current (Fixed) assets are a bit more permanent and are worth a lot more  

Final Accounts Definitions   Liabilities These are the things a business OWES Can be split in to CURRENT and NON-CURRENT (LONG TERM). Current liabilities are short term debts paid back within 12 months Non-Current (Long term)liabilities are debts paid back for more than 12 months

Profit Statements The following slide has an example of an Income Statement The layout of the account is the same for almost all organisations

Example Income Statement Activities 11 - 12

Example Statement of Financial Position Activities 11 - 12