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ACCN1- Introduction to Financial Accounting
Chapter Two ­ Profits
The owners of a business are interested in what their business is worth. This can be determined by preparing a
balance sheet or by using the accounting equation.
Not only are the owners of the business interested in what their business is worth, they are also interested to how
much their business is earning for them. They are interested in the profitability of their business.
PROFIT ­ is the excess of income over expenditure.…read more

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ACCN1- Introduction to Financial Accounting
PURCHASE RETURNS ­ are goods that the business sends back to the supplier. They are also known as RETURNS
OUT or RETURNS OUTWARDS.…read more

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ACCN1- Introduction to Financial Accounting
Chapter Five ­ The Final Accounts
FINAL ACCOUNTS ­ is the term often used to describe the trading account and the profit and loss account and the
balance sheet produced by the owner of a business at the financial year end.
A full set of final accounts is produced at the end of the financial year. This enables the owner of the business to see:
If the business is running profitably during the year.…read more

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ACCN1- Introduction to Financial Accounting
Each individual entry in the sales returns day book is posted to the credit side of the customer who returned the
goods (they have `lost' the goods).
Sales Returns Day Book
The source document (in this case the source document will be the copy of the credit note)
Book of Prime Entry (in this case the `book of prime entry' will be the sales returns day book.…read more

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ACCN1- Introduction to Financial Accounting
Liabilities are always credit balances. Creditors/Payables are examples are where the owner of a business or a
company owes money to a supplier.
USES OF THE TRAIL BALANCE
The trail balance has only one function and that is: to check the arithmetic accuracy of the double entry system.
However, the trail balance can be used as a list from which to prepare the final accounts.…read more

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