Introduction to Final AccountsThe primary function of accounting includes computing the net result of operations of the business for the current period. To meet out this purpose, Income statement and Balance sheet are prepared. These two documents are popularly called as Final Accounts. It is the last phase of Accounting Process.The components of final accounts depend upon the type of entity. In case of non-manufacturing entities, the business operations include purchase and sale of goods. That is why Trading Account is prepared to calculate Gross Profit.But a manufacturing entity is interested in computation of total cost of manufacturing the finished products. For this purpose, separate account is prepared as Manufacturing Account. The following table shows the components of final accounts for manufacturing and non-manufacturing firms:INCOME STATEMENT:n the real world, companies that operate at a global level provide a wide range of products and services and involve themselves in mergers and partnerships. Due to these activities, they have a complex list of activities and expenses to note. These companies also have to comply with specific reporting regulations. So bigger companies opt for multi-step income statements. In this system, operating revenues, operating expenses, and gains are separated from non-operating expenses, non-operating revenues, and losses. Profitability is represented at four levels: gross, operating, pre-tax, and post-tax. The following example uses the same company data as the single-step income statement.Balance Sheet: A balance sheet is a financial statement that contains details of a company’s assets or liabilities at a specific point in time. It is one of the three core financial statements (income statement and cash flow statement being the other two) used for evaluating the performance of a business.A balance sheet serves as reference documents for investors and other stakeholders to get an idea of the financial health of an organization. It enables them to compare current assets and liabilities to determine the business’s liquidity, or calculate the rate at which the company generates returns. Comparing two or more balance sheets from different points in time can also show how a business has grown. With this information, stakeholders can also understand the company’s prospects.