The final account which were drawn up the end of the year for the boot repairer’s business. It should be noted that a balance sheet as distinct from a profit and loss account does not from part of the double-entry system but is a statement compiled from the capital accounts included in the system. The object of the final accounts may be simply expressed as:
a. To show the profit or loss for the period
b. To show the financial position at the end of the period.

These object require, however, some further examination. The statement of profit or loss which normal revenue accounts disclose conveys little information as to the operating efficiency during a past period, and provides no guide to the future. It is necessary for the accounts to show clearly and simply the main headings of income and expenditure which gave rise to the profit or loss and to compare these figures with some independent standart.

So far as the balance sheet is concerned the expression ” financial position” which is nowadays applied to this statement is a rather vague term capable of various interpretations. It was probably introduced into accountancy terminology to remove any idea that a balance sheet purported to show the current value of the undertaking or its assets, especially in a period of changing money value.