What is final accounts with examples?

Related CoursesBookkeeping GuidebookClosing the BooksThe Year-End CloseWhat are Final Accounts?Final accounts is a somewhat archaic bookkeeping term that refers to the final trial

What is final accounts with examples?

Bookkeeping Guidebook

Closing the Books

The Year-End Close

What are Final Accounts?

Final accounts is a somewhat archaic bookkeeping term that refers to the final trial balance at the end of an accounting period from which the financial statements are derived. This final trial balance includes every journal entry used to close the books, such as:

  • Wage and payroll tax accruals
  • Income tax accruals
  • Asset write downs
  • Adjustments to reserves for returns, bad debts, and obsolete inventory
  • Depreciation and amortization
  • Overhead allocation
  • Customer billings

Thus, final accounts can refer to the final trial balance or the financial statements upon which they are based. The primary financial statements are the income statement, balance sheet, and statement of cash flows.

Since final accounts refers to a company's ending account balances, which in turn are used to create financial statements, this means that the final accounts reveal the results of the business during a period, its financial position at the end of that period, and its sources and uses of funds during that period (which is the purpose of the financial statements). Auditors rely upon a clients final accounts to conduct an audit of its accounting records and financial statements.

A final account, or final accounting, can also be the summarized statement issued when a business transaction has been concluded. For example, when someone leaves a hotel, they are given a final accounting of what they owe the hotel.

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