Arrange the following in the context of Accounting for partnership. A…

Arrange the following in the context of Accounting for partnership.

A. Preparation for Trading and Profit and Loss Account.
B. Calculation of divisible profit or Loss.
C. Preparation of profit and loss Appropriation Account.
D. Preparation of Balance Sheet.
E. Preparation of partners' capital Account.

Choose the correct answer from the given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → A, C, B, E, D

The final accounts of a firm are prepared in an order where each statement takes its starting figure from the one before:

A. Preparation for Trading and Profit and Loss Account. — gives the net profit of the firm.

C. Preparation of profit and loss Appropriation Account. — it starts with that net profit and adjusts interest on capital, salaries and commission to partners, and interest on drawings.

B. Calculation of divisible profit or Loss. — the balance left in the appropriation account is the profit divisible among the partners.

E. Preparation of partners' capital Account. — each partner’s share is transferred to his capital account.

D. Preparation of Balance Sheet. — prepared last, with the closing capital balances.

NCERT (2026-27 edition):
Summary – “… The distribution of profits among the partners is shown through a Profit and Loss Appropriation Account, which is merely an extension of the Profit and Loss Account. It is usually debited with interest on capital and salary/commission allowed to the partners, and credited with net profit as per Profit and Loss Account and the interest on drawings. The balance being profit or loss is distributed among the partners in the profit sharing ratio and transferred to their respective capital accounts.”

NCERT (2026-27 edition):
Fixed Capital Method – “… While the partners’ capital accounts shall always appear on the liabilities side in the balance sheet, the partners’ current account’s balance shall be shown on the liabilities side, if they have credit balance and on the assets side, if they have debit balance.”