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Answer Posted / shankarvel
In accounting paralance, finalisation of accounts means
closing the books of entry for the financial year.
This is done as follows:
Prepare as TRIAL BALANCE based on the Ledger accounts.
With the help of T/B, prepare the Final Accounts, namely:
Trading & Profit and Loss Account
Balance Sheet.
Post all the direct expenses and income in Trading Account.
TOTAL DIRECT INCOME - TOTAL DIRECT EXPENSES = GROSS PROFIT.
Carry forward the Gross Profit to P& L A/c
Post all indirect expenses and income in P&L A/c, along
with the Gross Profit brought forward from Trading.
INDIRECT INCOME - INDIRECT EXPENSES = NET PROFIT.
Now post the Net profit to the Balance sheet- add to the
capital account.
Tally the Balance sheet, a well tallied B/S shows accounts
have been finanalised.
Some minor differences can be shown in Suspense account for
rectification later
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