JAMB Accounts Principles of Accounts 2018 Paper

Concept:The profit and loss account is prepared on the accrual basis, not the cash basis.Explanation:Adjustments such as accrued expenses, prepayments, and outstanding incomes are made to match costs and revenues to the correct accounting period.They ensure that only expenses incurred and income earned during the year are recorded.This is done regardless of whether cash has actually been paid or received.As a result, the profit and loss account shows the true financial performance of the business for that period.Answer:D. To ascertain the actual expenses incurred and income earned during the year.