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1. True, 

2. True, 

It is a financial statement prepared at the period end for knowing business result, i.e., profit or loss. It is a nominal a/c contain all indirect expenses loss and indirect income and profit.

The expenses which directly involved in production called direct expenses. All direct expensses are recorded in trading a/c debit side. 

1. False

2. False

1. False

2. True

The expenses which is not directly involved in production but relating to the business called indirect expenses. There expenses are recorded in profit and loss a/c debit side.

Final accounts is the process of preparation of finanicial statements at the end of the year. 

Trading a/c is a financial statement prepared for the purpose of finding out trading result or a gross profit or loss of a business concern for a particular period.

Manipulation in the statements can arise because of involvement of personal judgment.

Balance sheet shows the financial position of the company.

A statement of Profit and Loss shows the profitability of the business.

The financial position of the company as on a particular date is shown by Balance Sheet.

(a) Bills payable 

(b) Plant and machinery 

(a) Bills payable = Balance sheet liability side 

(b) Plant and machinery = Balance sheet assets side.

It is a positive trading result. The excess of sales and closing stock over purchases, direct expenses and opening stock called gross profit.

Net profit is the surplus remaining after meeting all indirect expenses out of gross profit. 

The financial statement prepared at the period and to show now the profit of a company appropriat or the internal profit of the company allocation called ‘profit and loss appropriation’ account. 

Balance sheet is prepared for the purpose of knowing financial position of a business concern.

The items appeared in trading a/c debit side are : 

1. Purchases 

2. Wages 

3. Freight charges 

4. Factory expenses

The person who purchase goods from business on credit it called debtor. 

If the debtors not able or agree to pay their debts that protion treated as bad debts.

1. Tangible assets 

2. Intangible assets 

3. Fixed assets 

4. Current assets

1. Machinery 

2. Goodwill 

3. Building 

4. Furniture

1. Cash 

2. Bank 

3. Stock 

4. Debtors

Statement of Cash Flows is also referred to as Cash Flow Statement.

Financial statements reflect monetary transactions.

The financial statements do not show the current value of assets as they are based on historical cost concept.

The financial transactions are recorded in a chronological order.

The purposes of preparing Trading Account are: 

a. To calculate gross profit earned or gross loss incurred during an accounting period 

b. To estimate the cost of goods sold 

c. To record direct expenses (i.e., expenses incurred on the purchases and manufacturing of goods) 

d. To measure the adequacy and reasonability of direct expenses incurred by comparing purchases with direct expenses incurred 

e. To compare the realized efficiency and performance with the desired or proposed targets 

f. To calculate net profit or net loss 

g. To ascertain net profit ratio and to compare this year’s net profit ratio with that of the desired and proposed target in order to assess the efficiency and effectiveness 

h. To measure the adequacy and reasonability of indirect expenses incurred by ascertaining ratio between indirect expenses and net profit

i. To compare current year’s actual performance with desired and planned performance 

j. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business.

The following are the objectives of preparing financial statements: 

1. To ascertain profit earned or loss incurred by a business during an accounting period. This is estimated by preparing Trading and Profit and Loss Account. 

2. To ascertain the true financial position of a business. This is reflected by the Balance sheet. 

3. To enable comparison of current year’s performance with that of the previous year’s, i. e., intra-firm comparisons. Also, to compare own performance with that of the other firms in the same industry, i.e., interfirm comparisons.

4. To assess the solvency and credit worthiness of the business 

5. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business 

6. To provide vital information to facilitate various users of accounting information in decision making process. 

The need to prepare a Balance Sheet are given below. a. It helps in determining the nature and book value of various assets, such as fixed assets, investments, current assets, etc. at the end of an accounting period. 

b. It helps in ascertaining the nature and amount of various liabilities like long term liabilities, current liabilities, provisions, etc., which a business owes.

c. It discloses important information about capital invested in a business. The additional capital invested during the accounting period, drawings of the owners and profit (or loss) added to (or deducted from) the capital of the business.

d. It helps I assessing the solvency of a business.

e. It discloses the true financial position of a business at a particular point of time.

f. It lays down the basis for maintaining new books for next accounting period. 

For knowing exact financial position and financial result of the concern, final accounts to be prepared.

Balance sheet is prepared for the purpose of knowing financial position of a business in a given period. It contains assets and liabilities of a business.

The Financial statements prepared under final accounts are : 

• Trading account 

• Profit and Loss a/c 

• Profit and loss appropriation a/c 

• Balance sheet