What are the primary components of final accounts?

The primary components of final accounts are the balance sheet, income statement, and cash flow statement.

The balance sheet, also known as the statement of financial position, provides a snapshot of a company's financial condition at a specific point in time. It lists the company's assets, liabilities, and shareholders' equity. Assets are what the company owns, such as cash, inventory, and property. Liabilities are what the company owes, such as loans and accounts payable. Shareholders' equity, also known as net assets, is the difference between assets and liabilities. It represents the residual interest in the assets of the entity after deducting liabilities.

The income statement, also known as the profit and loss account, shows the company's revenues, costs, and profits over a period of time. Revenues are the earnings from the company's main activities, such as sales of goods or services. Costs are the expenses incurred in generating these revenues, such as cost of goods sold and administrative expenses. The difference between revenues and costs is the company's profit or loss.

The cash flow statement shows the company's inflows and outflows of cash over a period of time. It is divided into three sections: operating activities, investing activities, and financing activities. Operating activities include the cash effects of transactions that create revenues and expenses. Investing activities involve the acquisition and disposal of long-term assets and investment securities. Financing activities include obtaining resources from owners and providing them with a return on, and a return of, their investments.

These three components of final accounts are interrelated. The income statement shows the company's profitability, which affects the retained earnings in the shareholders' equity section of the balance sheet. The cash flow statement shows how the company's cash position has changed, which is reflected in the cash and cash equivalents item on the balance sheet. By analysing these components, stakeholders can assess the company's financial performance and position.