Video narration
Is "final accounts" just the business's closing bank balance? At a reporting date, many transactions become a picture-not necessarily when the business stops operating. But final accounts are not one account or balance. They are statements answering two questions: did the business make money, and what does it own and owe? First, performance. Sales minus costs gives profit or loss. The profit and loss account shows that result. In traditional formats, a trading account comes first to calculate gross profit. Second, position. The balance sheet shows assets, liabilities, and equity: what the business owns, owes, and the owners' interest. That is not the same as cash in the bank; a business can make a profit without holding it as cash. So why prepare them? To understand performance and position. Final accounts are the end-of-period report: profit and loss shows performance, while the balance sheet shows financial position.