passwella.
Menu

JAMB Principles of Accounts 1995 Question 15

Question 15

Final Accounts of a Sole Trader

Why are adjustments in the profit and loss account necessary?

  1. A.To cover some expenses of the following year
  2. B.To ascertain the actual expenses incurred and income earned during the year
  3. C.To show the provisions made during the year
  4. D.To show the total expenses paid and income received during the year.
Show the answer and explanation

Answer: B (To ascertain the actual expenses incurred and income earned during the year)

Explanation

Adjustments (accruals, prepayments, provisions) make the account show the income earned and expenses incurred for the year, not just cash paid or received.