Choose the correct sequence of financial statements prepared for a partnership firm at the end of a financial year:A. Capital AccountsB. Profit and Loss A/cC. Profit and Loss Appropriation A/c (Adjustment A/c)D. Balance SheetChoose the correct answer from the options given below:
- AA, B, C, D
- BB, C, D, A
- CB, A, C, D
- DB, C, A, D
Solution & Step-by-step Explanation
The appropriate standard chronological flow for constructing financial statements at year-end for a partnership is:Profit and Loss Account (B): Done first to derive the net trading business profit/loss.Profit and Loss Appropriation Account (C): Prepared to distribute the net profit among partners according to partnership contract criteria.Partners' Capital Accounts (A): Built next to record adjustments for drawings, interest, shares of profit/loss, etc.Balance Sheet (D): Drawn up last using the updated capital balances and statement values to reflect the ultimate position.Hence, the sequence is B, C, A, D.