Identify the correct sequence to be followed while preparing of final account of a partnership firm:

(A) Profit and Loss Appropriation Account
(B) Profit and Loss Account
(C) Trading Account
(D) Balance Sheet

Choose the correct answer from the options given below:

The correct answer is (C), (B), (A), (D).

Let us understand the step-by-step process of preparing the final accounts for a partnership firm:
1. Trading Account (C): This is the first account prepared in the finalization process. It determines the gross profit or gross loss of the business during a financial year by comparing net sales against the cost of goods sold.
2. Profit and Loss Account (B): Once the gross profit or loss is calculated from the Trading Account, it is transferred to the Profit and Loss Account. This account incorporates other operating and non-operating incomes and expenses to arrive at the Net Profit or Net Loss of the firm.
3. Profit and Loss Appropriation Account (A): For a partnership firm, the Net Profit or Net Loss obtained from the Profit and Loss Account is not distributed directly. It is transferred to the Profit and Loss Appropriation Account. This account is specifically prepared to show how the net profits are appropriated (distributed) among partners according to the partnership deed (e.g., interest on capital, partner salary, commission, and division of remaining profit).
4. Balance Sheet (D): After determining the final capital balances of each partner (incorporating adjustments from the Appropriation Account), the Balance Sheet is prepared. It represents the final statement showing the financial position (assets, liabilities, and partners' capital) of the partnership firm on a specific date.

Therefore, the correct chronological sequence to be followed is (C) → (B) → (A) → (D).