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What is the purpose of preparing final accounts?

Practice Questions

Q1
What is the purpose of preparing final accounts?
  1. To determine the financial position of a business
  2. To calculate tax liabilities
  3. To assess employee performance
  4. To prepare for audits

Questions & Step-by-Step Solutions

What is the purpose of preparing final accounts?
  • Step 1: Understand that final accounts are financial statements prepared at the end of a financial period.
  • Step 2: Recognize that these accounts include the income statement and balance sheet.
  • Step 3: Know that the income statement shows how much money the business made and spent.
  • Step 4: Learn that the balance sheet shows what the business owns (assets) and what it owes (liabilities).
  • Step 5: Realize that preparing final accounts helps business owners see if they made a profit or a loss.
  • Step 6: Understand that final accounts are also used to inform stakeholders, like investors and banks, about the business's financial health.
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