The correct answer is: D. 4, 2, 3 and 1
The correct sequence of the following actions required for the preparation of financial accounts is:
- Trading account
The trading account is a statement of the gross profit or loss made by a business over a period of time. It is prepared by comparing the sales revenue with the cost of goods sold.
- Making adjusting entries
Adjusting entries are made at the end of an accounting period to ensure that the accounts are accurate and up-to-date. They are necessary to account for items that have not been recorded during the normal course of business, such as depreciation and accrued expenses.
- Balance sheet
The balance sheet is a statement of the financial position of a business at a particular point in time. It shows the assets, liabilities, and equity of the business.
- Profit and Loss account
The profit and loss account is a statement of the income and expenses of a business over a period of time. It shows the gross profit, operating expenses, net profit or loss, and other comprehensive income of the business.
The following is a brief explanation of each option:
- Option A: 4, 2, 1 and 3. This is not the correct sequence of the actions required for the preparation of financial accounts. The trading account should be prepared before the balance sheet and the profit and loss account.
- Option B: 2, 4, 3 and 1. This is not the correct sequence of the actions required for the preparation of financial accounts. The balance sheet should be prepared before the profit and loss account.
- Option C: 2, 1, 4 and 3. This is not the correct sequence of the actions required for the preparation of financial accounts. The trading account should be prepared before the making adjusting entries.
- Option D: 4, 2, 3 and 1. This is the correct sequence of the actions required for the preparation of financial accounts.