Kalp Accounting Learning Articles

What is a Balance Sheet and how is it prepared ? A Balance Sheet is a statement of Accounts in Financial Accounting,which is prepared to know the financial position of a business. Financial position means,the details of Assets and Liabilities or Sources of Funds and Application of Funds. Generally,Balance Sheet is prepared at the end of an Accounting period. It is the final stage of Final Accounts. Balance Sheet is prepared after completion of the following Account Books and statement. Journal  Ledger Trial Balance Manufacturing,Trading,Profit & Loss Account Note : in case of  Manufacturing business - Manufacturing,Trading and Profit & Loss is applicable. Trading Business - Trading and Profit & Loss is applicable. Service Business - Profit & Loss Account or Statement of Income is applicable. For a newly started business,there is no need to prepare Balance Sheet. It is prepared only at the end of an Accounting period. For an existing/running business the Books of Account

In a Trading Business, Trading and Profit and Loss Account is prepared by extracting the related Ledger Accounts from Trial Balance. Mainly Nominal Ledger Accounts (Incomes/gains and Expenses/Losses) from Trial Balance are taken into consideration for preparing the Trading and Profit & Loss Account. Opening Stock and Closing Stock values are also taken into consideration for preparing Trading Account. Trading Account and Profit & Loss Account are two separate Accounts. But due to the inter-relationship between both the two Accounts,it is represented and pronounced as one Account. The inter-relationship between Trading Account and Profit & Loss Account is that,Gross Profit/Loss derived from Trading Account is transferred to Profit & Loss Account. Profit & Loss Account is prepared by taking the Gross Profit/Loss amount derived from Trading Account. What is Trading Account and how is it prepared ? Trading Account is a Ledger Account prepared at the stage of Final Acco