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Final accounts, also known as financial statements or annual accounts, are a set of documents that summarize a company’s financial performance and position for a specific period, usually the end of its fiscal year. These accounts provide stakeholders, including shareholders, investors, creditors, and regulators, with essential information about the company’s financial health and operations. The main components of final accounts typically include:

  1. Income Statement (Profit and Loss Account): The income statement summarizes a company’s revenues, expenses, gains, and losses over a specified period, usually one year. It shows whether the company has made a profit or incurred a loss during that time. The typical format includes:
    • Revenue (Sales)
    • Cost of Goods Sold (COGS)
    • Gross Profit (Revenue – COGS)
    • Operating Expenses (e.g., salaries, rent, utilities)
    • Operating Income (Gross Profit – Operating Expenses)
    • Other Income and Expenses
    • Net Income before Taxes
    • Income Taxes
    • Net Income (Profit or Loss)
  2. Balance Sheet (Statement of Financial Position): The balance sheet provides a snapshot of a company’s financial position at a specific point in time, usually the end of the fiscal year. It presents the company’s assets, liabilities, and shareholders’ equity. The basic equation of the balance sheet is:

    Assets = Liabilities + Shareholders’ Equity

    The balance sheet typically includes:

    • Current Assets (e.g., cash, accounts receivable, inventory)
    • Non-current Assets (e.g., property, plant, equipment, intangible assets)
    • Current Liabilities (e.g., accounts payable, short-term debt)
    • Non-current Liabilities (e.g., long-term debt, deferred taxes)
    • Shareholders’ Equity (e.g., common stock, retained earnings)
  3. Cash Flow Statement: The cash flow statement shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking down the sources and uses of cash during the period. It typically includes:
    • Operating Activities (e.g., cash from sales, payments to suppliers)
    • Investing Activities (e.g., cash from sales of assets, purchases of investments)
    • Financing Activities (e.g., cash from issuing stock, repaying loans)
    • Net Increase (Decrease) in Cash and Cash Equivalents

Final accounts are prepared in accordance with generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS) and are crucial for assessing a company’s financial performance, making investment decisions, and fulfilling regulatory requirements