12 December 2009
please help me to understand what does finalisation means . IS it the same way as we do in books of accounts or studied at B.com level. what points to be considered.
12 December 2009
Finalization means passing adjustment entries to close the books.
Some adjustment entries are to be passed to follow "accrual concept, realization concept etc." of accounting. Like prepaid expenses, accrued interest earned, depreciation; provision for bad debts etc.. For these type of transactions; you will not find vouchers. You will apply accounting principles and accordingly you will pass the entries.
Till B.Com. level you have understood as mentioned above.
In case of companies; now-a-days; notes on accounts are very important. These are called financial reporting. For example; when you have charged depreciation; then with B/S and P & L a/c you have to attached "notes on account" which will explain each and every item appearing in the b/s and p&l a/c.
For example; it will show how you have calculated the depreciation. Because on the face of P & L a/c it will not be clear which depreciation policy (i.e. w.d.v or straight line method) you are following.
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