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Question
"A trading account reveals the financial position of an organisation." Comment.
Solution
The statement "A trading account reveals the financial position of an organization" is incorrect.
A trading account mainly shows the results of purchasing and selling items, with a focus on the gross profit or loss from these transactions. It determines the gap between sales income and the cost of goods sold. However, it does not provide a complete overview of the organization's overall financial status, including assets, liabilities, and equity. The balance sheet reveals the entire financial status.
RELATED QUESTIONS
What are the features of a Balance Sheet?
Explain five uses of Balance Sheet.
Distinguish between a Profit and Loss Account and a Balance Sheet.
It is a statement of assets and liabilities. It is prepared to judge the financial position on a particular date.
The main use(s) of a Balance Sheet for a non-trading organisation is/are ______.
It is always prepared on a particular date.
It is not an account but a statement.
______ shows the financial position of the organization.
Balance sheet is an Account. Justify.
Write a short note on Role of Balance Sheet in decision making.
