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Statement of final accounts or financial accounting is the process of preparing financial statements that companies use to show their financial performance and position to people outside the company, including investors, creditors, suppliers, and customers.
The preparer of financial statements generally put together a quarterly and annual financial statement, which they make available to shareholders and the investing public. There are four basic financial statements used in the accounting world to show a company’s financial performance:
Financial Statements |
Explanation |
Income Statement or Profit and Loss Statement - |
In accordance with the Generally Accepted Accounting Principals (GAAP), revenue is always recorded in the period of the sale of the goods and services, which may not be the same period when cash is actually received. |
Balance Sheet - |
The cost of the insurance that has not yet expired remains on the balance sheet (is "deferred" to the balance sheet) in the asset account Prepaid Insurance. This is followed following the accounting principle of going concern entity which implies that the business entity will continue its operations in the future and will not liquidate or be forced to discontinue operations due to any reason. An entity is a going concern if no evidence is available to believe that it will or will have to cease its operations in the foreseeable future.
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Cash flow statements (CFS) - |
International Accounting Standard (IAS 7) Statement of Cash Flows requires an entity to present a statement of cash flows as an integral part of its primary financial statements. Cash flows are drafted and presented into operating activities (either using the 'direct' or 'indirect' method), investing activities or financing activities, with the latter two categories generally presented on a gross basis. |
Statement of retained earnings - |
Retained Earnings (RE) are the portion of a business’ profits that are not distributed as dividends to shareholders but instead are reserved for reinvestment back into the business. These represent a useful link between the income statement and the balance sheet, as they are recorded under shareholders’ equity which connects the two statements. |
Financial Statements |
Where do we find them |
Shortcut key |
Income and Expenditure or Profit and Loss Account - |
Where do we find them? On gateway of Tally screen Income and Expenditure Account : Income & Expenditure Statement is suitable for organizations which do not engage in trading of goods or services. We can toggle between Income and Expenditure Statement and Profit & Loss A/c by pressing F 11 on the keyboard and setting the option Use Income and Expenses A/c instead of Profit and Loss A/c? to Yes/No as, as required. |
For Profit and Loss Account = Letter “P” on the keyboard For Income and expenditure Account = Letter “N” on the keyboard |
Balance sheet - |
Where to find? On the gateway of Tally screen. |
Letter “B” on the keyboard |
Cash flow statements - |
Where to find? Gateway of Tally > Display > Cash/Funds Flow > Cash Flow . |
The main objectives of financial accounting could be
Apart from the above there are some objectives of financial accounting which could be derived from the above and they are:
Financial Accounting is to report the results of most business events. Hence, it becomes important to keep a systematic record of these events. This function embraces recording transactions in journal and subsidiary books like cashbook, sales book etc., posting them to ledger accounts and ultimately preparing the financial statements [final accounts].
The other main function of financial accounting is to communicate the financial facts of the enterprise to the various interested parties like owners, investors, creditors, employees, government, and research scholars, etc.
The cause of this function is to enable these parties to have better understanding of the business and take sound and realistic economic decisions.
Financial accounting aims at fulfilling the legal requirements, especially of the tax authorities and regulators of the business by discharging this function in accordance with certain fundamental truths and uniform enforcement of generally accepted accounting principles.
Tally Accounting is a software used for financial accounting purposes. It is provided by Tally Solutions and is a standard business accounting software. Tally.ERP 9 is a very robust ERP product and is a complete business management solution.
All the accounting activities, such as financial records of a business, the generation of statements concerning the liabilities and assets of a business, all of them are easily managed with Tally solution.
The name of the business solution, Tally, is inspired by the meaning of the word "tally", which is to count, to keep the record.
Accounting is the activity or the system of keeping records of transactions of a business or any other organizations in monetary terms. It records the money or value for money received by or given to different persons or entities from time to time. It enables an organization to ascertain facts such as money owed to or by different entities, the assets and liabilities of the organization in different forms and the profit or loss made by it during specified periods.
Tally is a trading name of accounting software maintaining accounts, and for performing additional accounting and other analytical operations helpful in the management of an organization.
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