User:Stanley09

TRADING ACCOUNT:

(Final Account )

The trading account of a business entity is commonly called the final account of a business enterprise.This account is prepare by a sole trader form of business who trade in finished stock items.

In preparing this account,it record does not take note of manufacturing transactions, but those that are related to finished stock items,trading expenses etc.While other transactions are related to the balance sheet update,such as assets,liabilities, capital and profits.

THE MAIN PURPOSE OR OBJECTIVE OF THIS ACCOUNT is to ascertain the profitability or loss of a business at the end of a financial year.

IMPORTANT OF FINAL ACCOUNT (Trading Account):The records of a final account are prepared by a trading entity because:

●It ascertain the profit or loss of a business.

●It summarize the operating activities of a business at the end of its trading period.

●It report the financial position of an entity (that is a business or an organization).

●It shows how a business entity has performed financially over a particular period of time (that is an accounting period ).

●It information are historical not related to future activities.

●It is use as a third party in obtaining finance (i.e loan).

●It communicate accounting information to users.

PRINCIPLES OF FINAL ACCOUNT :

In preparing the record of a final account we should note that:

●It has a stated or prescribe format.

●It transactions are made up of the trial balance and note notes.

●All transactions in the trial balance should be treated one time,and that of the foot note are treated twice.

●All adjustment should be treated twice.EG:such as depreciation,accurals,prepayment, provision for bad debt.

●It classified transactions into sections such as earning income,operating expenses,cost of goods sold,assets,liabilities etc...

●It maintained transactions at close in the balance sheet,with the exception of opening capital.

●A final account should contain a currency and a date.

Thanks so much..My name is Stanley Dixon from Sierra Leone.For more information please email me :Stanleydixon801@gmail.com/whatsapp number :232088349694.