Forums
Back
Functions of Accounting
Accountancy
It says that Accounting measures past performance and PRESENT financial position. Question is this , without preparing current period's Profit and Loss a/c, how can it measure PRESENT FINANCIAL position ? Please guide me
Answers (3)
It is true that Accounting measures past performance and PRESENT financial position. Past performance means the entity's performance in the past accounting year is reflected thought P & L. The P & L can be prepared only when the past period ends and it shows the performance of the entity in the past period. Present Financial Position refers to the current position of the entity through its Balance Sheet. It shows the entity's position as on a particular date. So, Past Performance - P & L Present Position - Balance Sheet And, it is true that Balance Sheet can be prepared only after the preparation of the P & L.
It is true that Accounting measures past performance and PRESENT financial position. Past performance means the entity's performance in the past accounting year is reflected thought P & L. The P & L can be prepared only when the past period ends and it shows the performance of the entity in the past period. Present Financial Position refers to the current position of the entity through its Balance Sheet. It shows the entity's position as on a particular date. So, Past Performance - P & L Present Position - Balance Sheet And, it is true that Balance Sheet can be prepared only after the preparation of the P & L
