The procedure for compiling the final accounts at the end of an accounting period may now be summarised as follows:

The ultimate objective of the final accounting procedure is the preparation of a Balance Sheet. A Balance Sheet is not an account forming part of the double-entry system; it is a statement prepared from the accounts. The object of the Balance Sheet is to show the financial position of

a. Contingent liabilities Contingent liabilities are those which may become real liabilities on the happening of some specific event. Thus, if a business guaranteed the repayment of a loan made, say, to

The valuation of stocks for use in the revenue accounts is necessary for the purpose of finding the cost of goods or material sold in the period covered. The final revenue accounts should be charged only with the material actually used in the production of the period, whatever may be the value of purchases. Again, [...]

Stock in the sense used here may cover stock of raw materials, loose tools, brought-out goods, finished parts, partly made goods and work in progress. So far as raw materials are concerned, the generally accepted method of valuing stock is on the basis of cost or market value, whichever is the lower. Neither cost nor [...]

Reserves are usually divisible into two kinds – specific and general reserves. These again may be classified as either revenue reserves or capital reserves. An essential point to note is that a reserve is not a charge to be deducted before arriving at the profit for the period under review, but it is an appropriation [...]

Defines a provision as: ‘Any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets or retained by way of providing for any known liability of which the amount cannot be determined with substantialaccuracy.’ It will be noted that a provision is a charge against profits, but