Question

Rohan has started his business of retail trade at moderate level on October 1, 2014. He
desires that he should prepare first Profit and Loss Account and Balance Sheet on March
31, 2015 and thereafter every March 31. You have to appraise his decision and ascertain
whether his decision if justified.

Answer 1

Profit and loss account and balance sheet are made at the end of a financial year. The decision of Rohan to make his accounts on mar. 31 is right because normally an accounting year starts from Apr.1 and ends on March 31. Despite of the fact that he has started business on October 1 his accounting year would still end on Mar. 31. These accounts are known as final accounts just because of the reason that they are made at last to avoid any further transaction in that particular year.