A business which converts raw materials to finished goods prepares

A business that converts raw materials to finished goods prepares a "manufacturing, trading, profit and loss account, and balance sheet". This is because such a business engages in manufacturing activities, which involve converting raw materials into finished goods for sale. The manufacturing account is prepared to calculate the cost of production and to determine the gross profit earned from the sale of manufactured goods. The trading account shows the sales revenue, cost of goods sold, and gross profit earned by the business. The profit and loss account is prepared to calculate the net profit or loss earned by the business after deducting all expenses from the gross profit. Finally, the balance sheet is prepared to show the financial position of the business, including its assets, liabilities, and equity. Therefore, a manufacturing business needs to prepare all these accounts to properly understand and manage its financial performance.