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What is the primary purpose of preparing final accounts for a sole trader?
What is the primary purpose of preparing final accounts for a sole trader?
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Practice Questions
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What is the primary purpose of preparing final accounts for a sole trader?
To calculate the tax liability
To assess the financial position of the business
To determine the amount of inventory
To prepare for an audit
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The primary purpose of preparing final accounts is to assess the financial position of the business.
Questions & Step-by-step Solutions
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Q
Q: What is the primary purpose of preparing final accounts for a sole trader?
Solution:
The primary purpose of preparing final accounts is to assess the financial position of the business.
Steps: 5
Show Steps
Step 1: Understand that final accounts are financial statements prepared at the end of a period.
Step 2: Recognize that these accounts show how much money the business made and spent.
Step 3: Identify that the main goal is to see if the business is making a profit or a loss.
Step 4: Realize that final accounts help the sole trader understand their financial position.
Step 5: Conclude that knowing the financial position helps in making better business decisions.
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