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CA Foundation · Accounting · Partnership and LLP Accounts

Which of the following statements about the accounts and financial reporting of an LLP is correct?

An LLP must maintain proper books of account, on either cash or accrual basis using double entry, and file a Statement of Account and Solvency annually. It cannot skip accounts because partners manage it, and it is not restricted to cash basis or to profit years.

  1. AAn LLP is required to maintain proper books of accounts on cash or accrual basis and prepare a Statement of Account and SolvencyCorrect
  2. BAn LLP need not maintain books of accounts since partners manage it
  3. CAn LLP must prepare accounts only on the cash basis
  4. DAn LLP must prepare accounts only when it earns a profit

Explanation

An LLP must maintain proper books of account on a cash or accrual basis, on double entry. It must file a Statement of Account and Solvency every year. The other options contradict these requirements.

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