To enable the owners of a business to be able to make sense of its financial performance, it is useful for them to be able helpful to be able to compare the position year-on-year and give them perspective about the profitability of the business on an ongoing basis. This will enable them to make informed decisions about the business.
Therefore, periodically, the ledgers/accounts of a business will be ‘ruled off’ so that the balances on the various accounts can all be looked at together and the finances of the business compared with previous periods. This is done at the end of each accounting period/financial year and many businesses will also prepare ‘interim accounts’ during the course of a financial year.
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