1. Final Accounts
Ms. Zucchero

2. Purposes of Accounts
Final accounts are financial statements compiled by businesses at the end of a particular accounting period
Created to help inform internal and external stakeholders
Professional accountants have a responsibility to act in the public interest

3. Main Final Accounts
Profit and Loss Account, also known as the income statement
The Trading Account, The Profit and Loss Account, Appropriation Account

4. Profit and LoSs Account
Sales Revenue
Trading Account
Cost of Goods Sold
Trading Account
Gross Profit
Profit and Loss Account
Expenses
Profit and Loss Account
Net Profit Before Interest and Tax
Profit and Loss Account
Interest
Profit and Loss Account
Tax
Profit and Loss Account
Net Profit After Interest and Tax
Profit and Loss Account
Dividends
Appropriation Account
Retained Profit
Appropriation Account

5. Trading Accounts Formulas
Gross Profit = Sales Revenue - Cost of Sales
Cost of Sales = Opening Stock + Purchases - Closing Stock
A firm at the beginning of a trading period had $500 worth of stock. It then bought more stock during this period valued at $800. It then closed this period with stock valued at $200. What is its COGS during this period?
COGS = $500 + $800 - $200
COGS = $1,100
What would its gross profit be if it sold 400 units at $10 each?
Sales Revenue = $10 X $400 = $ Gross Profit = $ $1,100 = $2,900

6. The Balance Sheet Known as the financial position
Outlines the assets, liabilities, and equity of a firm
A snapshot of a business
Assets - Resources of value to a business
Fixed/Long Term - for more than 12 months - equipment, machinery
Current Assets/Short Term - last up to 12 months
Liabilities - Firms legal debt or what it owes to other firms
Long Term - long term debt or borrowing after 12 months - loans
Current Liabilities - Short term debt payable by the business within 12 months
Equity - Share Capital and Retained Profits

7. Profitability and Liquidity Ratio Analysis

8. Profitability RaTios, Efficiency Ratios, Liquidity Ratios
Ratio Analysis is a tool used in the interpretation and assessment of a firm’s financial statements
Profitability Ratios - Gross Profit Margin (GPM), Net Profit Margin (NPM)
Efficiency Ratio - Return on Capital Employed
Liquidity Ratios - Current Ratio, Acid Test Ratio