Financial Statements (Without Adjustments) — Flashcards

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Financial statements are the statements prepared to know the result of business activities and the financial position of a business on a particular date. They help show profit or loss and the position…

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Income Statement is the combined statement of Trading Account and Profit and Loss Account. It is used to find out the gross profit or gross loss and then the net profit or net loss of a business.

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Trading Account is prepared to find out the Gross Profit earned or Gross Loss suffered by the business from business activities during an accounting year. It is prepared in T-form.

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Profit and Loss Account is prepared to find out the net profit or net loss of the business during an accounting year. It is prepared after the Trading Account and is also made in T-form.

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Balance Sheet, also called Position Statement, is prepared to know the financial position of a business on a particular date. It is prepared after the Trading Account and Profit and Loss Account are m…

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It is called a Position Statement because it shows the financial position of the business on a particular date, not for the whole year. It shows what the business owns and what it owes at that date.

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The left-hand side shows liabilities and the right-hand side shows assets. This arrangement helps present the financial position clearly.

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Gross profit is found in the Trading Account and shows profit from business trading activities. Net profit is found in the Profit and Loss Account and is calculated after adding indirect income and su…