Identify the right combination of type of Account in making Final Acc…

Identify the right combination of type of Account in making Final Accounts of Partnership Firm.

(a) Profit and Loss A/C

(b) Profit and Loss Suspence A/C

(d) Profit and Loss Adjustment A/C

(e) Partners’ Capital A/Cs

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (a), (c), (e) only

The final accounts of a partnership firm are much like those of a sole proprietor. The firm finds its profit in the Profit and Loss Account. Then it prepares one extra account, the Profit and Loss Appropriation Account, to share that profit among the partners, and the shares go to the partners' capital accounts.

(a) Profit and Loss A/C — Part of the final accounts. It works out the net profit or net loss of the firm for the year, as in any business.

(b) Profit and Loss Suspence A/C — Not part of the final accounts. This account is opened only when a partner dies or retires during the year, to give him his share of profit up to that date. It is not prepared every year.

(c) Profit and Loss Appropriation A/C — Part of the final accounts. It starts with the net profit and shows interest on capital, salary, commission and interest on drawings, and then each partner's share of the balance.

(d) Profit and Loss Adjustment A/C — Not part of the final accounts. It is used only to correct past errors found after the final accounts are ready (for example, interest on capital left out), so it is not a regular final account.

(e) Partners’ Capital A/Cs — Part of the final accounts. Every transaction with the partners, including their share of profit, is recorded in their capital accounts, and the balances appear in the balance sheet.

NCERT (2026-27 edition):
Distribution of Profit among Partners – “… You know that in the case of sole partnership the profit or loss, as ascertained by the profit and loss account is transferred to the capital account of the proprietor. In case of partnership, however, certain adjustments such as interest on drawings, interest on capital, salary to partners, and commission to partners are required to be made. For this purpose, it is customary to prepare a Profit and Loss Appropriation Account of the firm and ascertain the final figure of profit and loss to be distributed among the partners, in their profit sharing ratio.”

Maintenance of Capital Accounts of Partners – “All transactions relating to partners of the firm are recorded in the books of the firm through their capital accounts. This includes the amount of money brought in as capital, withdrawal of capital, share of profit, interest on capital, interest on drawings, partner’s salary, commission to partners, etc. There are two methods by which the capital accounts of partners can be maintained. These are: (i) fixed capital method, and (ii) fluctuating capital method.”

NCERT (2026-27 edition):
Past Adjustments – “Sometimes a few omissions or errors in the recording of transactions or the preparation of summary statements are found after the final accounts have been prepared and the profits distributed among the partners. The omission may be in respect of interest on capitals, interest on drawings, interest on partners’ loan, partner’s salary, partner’s commission or outstanding expenses. There may also be some changes in the provisions of partnership deed or system of accounting having impact with retrospective effect. All these acts of omission and commission need adjustments for correction of their impact. Instead of altering old accounts, necessary adjustments can be made either; (a) through ‘Profit and Loss Adjustment Account’, or (b) directly in the capital accounts of the concerned partners.”