Question

Select the most appropriate alternative from those given below and rewrite the statement.

Final accounts are prepared on the basis of _________________ and adjustments.

Options

• trial balance

• capital A/c

• trading A/c

•  profit and loss A/c

Answer 1

Final accounts are prepared on the basis of trial balance and adjustments.

Explanation: Final accounts are prepared based on Trial Balance and adjustments. A Trial Balance contains all the items recorded in the books prepared before, i.e. Journal or Subsidiary books. Certain adjustments related to bad debts, managers’ commissions, etc., are also considered while preparing final accounts.