Accountancy Part AAccounting for Partnership

State the order in which final accounts of a partnership firm are pre…

State the order in which final accounts of a partnership firm are prepared

(A) Profit and Loss A/c
(B) Balance Sheet
(C) Trading A/c
(D) Profit & Loss Appropriation A/c
(E) Partners' Capital Accounts

Choose the correct answer from the options given below.

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (C), (A), (D), (E), (B)

Each account starts from the balance of the one before it, and the balance sheet comes last because it shows the closing balances.

(C) Trading A/c — first: it gives the gross profit.
(A) Profit and Loss A/c — second: it starts with the gross profit and gives the net profit.
(D) Profit & Loss Appropriation A/c — third: an extension of the Profit and Loss Account that distributes the net profit among the partners.
(E) Partners' Capital Accounts — fourth: they are credited with the partners’ shares of profit, interest and salary.
(B) Balance Sheet — last: it shows the closing balances of all accounts, the capital accounts included.

NCERT (2026-27 edition):
Terms Introduced in the Chapter – “… 8. Preparation of final accounts of a partnership firm: There is not much difference in the final accounts of a sole proprietary concern and that of a partnership firm except that in case of a partnership firm an additional account called Profit and Loss Appropriation Account is prepared to show distribution of profit and loss among the partners.”

NCERT (2026-27 edition):
Profit and Loss Appropriation Account – “Profit and Loss Appropriation Account is merely an extension of the Profit and Loss Account of the firm. It shows how the profits are appropriated or distributed among the partners.”