What is the purpose of preparing a final account in a partnership?
Practice Questions
1 question
Q1
What is the purpose of preparing a final account in a partnership?
To determine the profit or loss
To assess the financial position
To distribute profits among partners
All of the above
The final account is prepared to determine the profit or loss, assess the financial position, and distribute profits among partners.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the purpose of preparing a final account in a partnership?
Solution: The final account is prepared to determine the profit or loss, assess the financial position, and distribute profits among partners.
Steps: 4
Step 1: Understand that a final account is a summary of a partnership's financial activities over a specific period.
Step 2: The first purpose of preparing a final account is to determine the profit or loss made by the partnership during that period.
Step 3: The second purpose is to assess the financial position of the partnership, which means looking at what the partnership owns (assets) and what it owes (liabilities).
Step 4: The final purpose is to distribute the profits among the partners according to their agreed-upon shares or ratios.
