Why are adjustments in the profit and loss account necessary?

A. To cover some expenses of the following year
B. To show the provisions made during the year
C. To show the total expenses paid and income received during the year
D. To ascertain the actual expenses incurred and income earned during the year

Correct Answer:

Option D – To ascertain the actual expenses incurred and income earned during the year

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.