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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

Which one of the following is a primary objective of preparing final accounts of a sole proprietorship business?

The main objective of final accounts is to determine the profit or loss earned during the accounting period and to show the financial position of the business on the closing date. Recording transactions, checking arithmetic and bank reconciliation are separate accounting activities.

  1. ATo ascertain the profit or loss for the period and the financial position on the closing dateCorrect
  2. BTo record every transaction in chronological order as it occurs
  3. CTo verify the arithmetical accuracy of ledger balances only
  4. DTo reconcile the cash book with the pass book

Explanation

Final accounts, comprising the trading and profit and loss account and the balance sheet, are prepared to find the result of operations for the year and the financial position at year end. Chronological recording is the function of journals and subsidiary books. Checking arithmetical accuracy is the purpose of the trial balance, and reconciling cash book with pass book is done through a bank reconciliation statement.

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