Question

Aims and objectives of adjustment in final account of partnership firm What are the aims of adjustment in partnership final account?

Answer 1

maintenance of financial statement for accounting period as per partnership deed among or between partners.

Answer 2

The main objectives of adjustment in final account are as follows:

 

To give effect to national incomes and expenses or non cash:

 

In business, there can be certain transactions that do not contribute to any inflow or outflow of cash into the business but are required to calculate the correct amount of profit. Such transactions are associated to depreciation on fixed assets, interest on capital and drawings, Provision for doubtful debts etc.

 

Bringing into accounts expenses of current year not yet entered in the books of accounts:

 

Matching concept of accounting states that all expenses of current year that are paid or not must be debited to the profit and loss account of current year. In order to show true profit, all expenses which are due but not yet paid or that are paid before due must be adjusted.

 

Bringing into accounts incomes of current year not yet recorded in the books of accounts:

 

Matching concept of accounting also states that income of current year must be credited in profit or loss account of current year regardless of whether they have been received or not.