Why are adjustments in the profit and loss account necessary?
- To cover some expenses of the following year
- To show the provisions made during the year
- To show the total expenses paid and income received during the year
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To ascertain the actual expenses incurred and income earned during the year
The correct answer is: D
Explanation
Fundamental principle of preparing P&L account is that expenses and income relating to only the trading period are taken to the trading profit and loss account.