and direct expenses are transferred to trading account. The balance in the trading account is the gross profit or gross loss. (v) Preparation of profit and loss account Profit and loss account is prepared next for a particular accounting period. All the indirect revenues and indirect expenses along with gross profit or gross loss are transferred to profit and loss account.
The balance in the profit and loss account is the net profit or net loss. (vi) Preparation of balance sheet A statement showing the balances of assets and liabilities namely balance sheet is prepared as the final step in the accounting process. It is prepared on a particular date, normally, on the last day of the accounting period. The closing balances of an accounting year are taken as the opening balances for the next accounting year.
The transactions identified and recorded for the next year are followed by posting and other steps. The results are communicated to the users of accounting information for the purpose of analysis and decision making. Transactions Journalising Preparing Trial Balance Preparing Trading Account Preparing Balance Sheet Opening Entry Preparing Profit and loss Account Posting and Balancing Accounting cycle Accountancy - . Objectives of Accounting Following are the objectives of accounting: (i) To keep a systematic record of financial transactions and events (ii) To ascertain the profit or loss of the business enterprise (iii) To ascertain the financial position or status of the enterprise (iv) To provide information to various stakeholders for their requirements (v) To protect the properties of an enterprise and (vi) To ascertain the solvency and liquidity position of an enterprise .
Functions of Accounting The main functions of accounting are as follows: (i) Measurement The main function of accounting is to keep systematic record of transactions, post them to the ledger and ultimately prepare the final accounts. Accounting works as a tool for measuring the performance of the business enterprises. It also shows the financial position of the business enterprises. (ii) Forecasting With the help of the various tools of accounting, future performance and financial