Profit and Loss Account

Definition of Profit and Loss Account

Profit and loss account is that part of final account is made for calculating the net profit or net loss. In the debit side of this account, we show all indirect loss and expenses and in the credit side of this account, we show all indirect incomes. After matching debit and credit side of profit and loss account, we can find net profit or loss of business. If organisation is company, we transfer this balance to profit and loss appropriation account, otherwise, we transfer this balance to capital account.

Explanation of Profit and Loss Account

A) Debit Side of Profit and loss account

1. Gross loss transferred  from trading account
2. All indirect expenses like sale expenses, office expenses and legal expenses
3. If credit side is more than debit side, we show net profit in debit side

B) Credit Side of Profit and Loss account

1. Gross profit transferred from trading account
2. Indirect Incomes like rent, commission, discount received
3. If debit side is more than credit side, we show net loss in credit side.



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Education : Profit and Loss Account
Profit and Loss Account
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