3.4 Final accounts
Unit 3.4 Final accounts (some HL only)
The topic of final accounts in the IB Business Management syllabus examines financial accounting (the published accounts of businesses available to and used by different stakeholders), rather than management accounting (which is created by and used for internal and confidential purposes).
This section of the syllabus looks at the two main final accounts of businesses: the balance sheet and the profit and loss account (or income statement). Both sets of final accounts are required to be published for legal reasons, but are also essential for the organization’s own strategic planning.
The learning outcomes (or assessment objectives) for this section of the IB Business Management syllabus are:
The purpose of accounts to different stakeholders (AO2)
Final accounts (AO2, AO4):
• Profit and loss account
• Balance sheet
Different types of intangible assets (AO2)
Depreciation using the following methods (HL only) (AO2, AO4):
• Straight line method
• Units of production methodAppropriateness of each depreciation method (HL only) (AO3)
Teacher only boxNote to teachers
Please note the following changes to the new syllabus (first exams 2024) for this section of the course:
The purpose of accounts to different stakeholders (AO3) has been reduced to an AO2.
The principles and ethics of accounting practice (AO3) has been removed from the new syllabus.
- Different types of intangible assets (AO1) has been elevated to an AO2.
- The reducing / declining balance method of depreciation (HL only) (AO2, AO4) has been removed.
- In place of the removal of the reducing method of depreciation, the units of production method of depreciation (HL only) (AO2, AO4) has been added to the syllabus.
- Finally, note that "The strengths and weaknesses of each method of depreciation (HL only) (AO2)" has been replaced with "Appropriateness of each depreciation method (HL only) (AO3)". Not the elevation of the assessment objective for this learning outcome.
It is also vital that teachers are aware of the following changes to the new course:
There have been changes to some of the terminology for this section of the new course, such as the removal of the term "net profit".
There is now a new prescribed format for the profit and loss account (see pages 59 - 60). When constructing or presenting the P&L account, the title should be "Statement of profit or loss".
There is also a prescribed format of the statement of profit and loss for non-profit business entities. In this case, the word "profit" in the accounts is replaced with the word "surplus" (see page 60 of the guide).
There is now a new prescribed format for the balance sheet (or statement of financial position) for a profit-making business entity (see page 61 of the guide) and for non-profit business entities (see page 62). The only difference in the presentation of the balance sheet for these different entities is that non-profit organizations do not have shareholders, so "share capital" does not appear in the final accounts.
A final but extremely important point to note is that the balance sheet must now be titled as "Statement of
financial position."
The table below provides a summary of the changes to terminology used in this unit of the syllabus:
The old guide (final exams N23) | The new guide (first exams M24) |
Cost of goods sold (COGS) | Cost of sales (COS) |
Fixed assets | Non-current assets |
Long-term liabilities | Non-current liabilities |
Net profit | Profit |
Net profit margin (NPM) | Profit margin |
Accumulated retained profit | Retained earnings |
Balance sheet | Statement of financial position |
Profit and loss account | Statement of profit or loss |
Profit (non-financial entity) | Surplus (non-financial entity) |
Please be aware of the above points if/when using resources for the previous syllabus, such as past IB examination papers and mark schemes.
InThinking Business Management resources
Click the hyperlinks below to access the InThinking resources for this particular section of the IB Business Management syllabus.
Profit & loss account (AO2, AO4)
Balance sheet (AO2, AO4)
Methods of depreciation (HL only) (AO2, AO4)
- Lesson idea: Christmas song royalties
- Final accounts - question bank (over 70 questions for students to try from the question bank)
- Glossary of key terms
Return to Unit 3 Finance & accounts homepage
