Short Answer Questions · Q4
Q.What practical difficulties are encountered by a trader due to incompleteness of accounting records?
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Because the records are incomplete, a trader faces these practical difficulties:
- A trial balance cannot be prepared, so the arithmetical accuracy of the accounts cannot be verified.
- The profit or loss cannot be correctly ascertained — only an estimate is possible.
- The profitability, liquidity and solvency of the business cannot be analysed, making it harder to raise funds and plan ahead.
- It is difficult to file an insurance claim for stock lost by fire or theft. …
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