Question

For what purposes, there is necessity of preparation of final accounts?

• A. To ascertain gross profit or gross loss of the business.
• B. To prepare various financial statements for future planning.
• C. To find out various accounting ratios.
• D. All of the above

Answer 1

The correct option is D All of the above

Final accounts include preparation of trading and profit & loss account of a firm along with its balance sheet. The main purpose to prepare such accounts is that firm wants to find out the gross profit or gross loss made during the year. Moreover, final accounts give a clear idea about the financial conditions of firm and thus helps in financial planning.

Accounting ratios can also be calculated using the information in various accounts in final accounting. Ratios like debt equity ratio, proprietry ratio, current ratio and many more can be calculated from final accounts