Format of Profit and Loss Account

FORMAT OF PROFIT AND LOSS ACCOUNT A CCOUNT Particulars

Amount

Particulars

Amount

To gross loss transferred from trading a/c

Xxx

By gross profit t ransferred ransferred from trading a/c

Xxx

To Salaries

Xxx

By interest received

Xxx

To rent ,rates and taxes

Xxx

By discount received

Xxx

To postage and telegram

Xxx

By commission received

Xxx

To Audit fees

Xxx

By income from investment

Xxx

To printing and stationery

Xx

By apprenticeship premium

Xxx

To telephone charges

Xxx

By bad debt recovered

Xxx

To legal charges

Xxx

By miscellaneous income

Xxx

To insurance

Xxx

To general expenses

Xxx

By net loss transferred to capital a/c

Xxx

To heating and lighting

Xxx

To advertisement advertisement

Xxx

To bad debt

Xxx

To export expenses

Xxx

To freight and carriage outwards

Xxx

To bank charges

Xxx

To entertainment expenses expenses

Xxx

To repairs and renewals

Xxx

To depreciation depreciation

Xxx

To interest

Xxx

To trade expenses

Xxx

To office expenses

Xxx

To discount allowed

Xxx

To travelling expenses

Xxx

To loss by fire and theft

Xxx

To interest on capital

xxx

To net profit transferred to capital a/c

xxx xxx

xxx

Treatment of certain items in Trading ,Profit and loss a/c 1.

Royalties

-payment made for using the right of others Eg: Amount paid by the publishing company to the author  Royalties are paid Based on production-Debited to trading A/c Based on sales-Debited to P&L A/c Note: If there is no instruction regarding royalties then it is debited to P&L a/c

Packages and Packing materials

Two Types Primary packing-----Debited to Trading A/c Ordinary packing ---Debited to P&L A/c

Note: If there is no instruction then it is debited to P&L A/c

Trade Expenses It represents business expenses of small amounts and should be debited to P&L A/c It is also called General expenses or Sundry expenses or Office expenses If both trade expenses and general expenses are given then trade expenses is debited in the trading A/c and general expenses in P&L A/c

Income Tax It is not an expense connected with running of business

It is treated as the personal expense of the proprietor  and is added with drawings which is ultimately deducted from capital in the Balance sheet

Balance sheet It is statement of  assets and liabilities of  business prepared with a view to ascertain the financial position of the business on a particular  date It is prepared immediately after the preparation of Trading P&L A/c Balance sheet consist of  two sides -Left hand side------- Liability side -Right hand side---- Asset side

Preparation of Balance sheet Two Ways In the order of liquidity In the order of Permanence

Balance sheet in the order of Liquidity Liabilities Current

Amount

Liability

Assets

Amount

Current Assets

Bank overdraft

Xxx

Cash

in hand

Xxx

Bills Payable

Xxx

Cash

at bank

Xxx

Outstanding expenses Xxx Sundry Creditors Xxx Long Term Liability Xxx Long term loan Capital

xxx

Xxx

Sundry Debtors

Xxx

Prepaid Expenses

Xxx

Accrued income

Xxx

Closing

Xxx

Stock

Fixed Assets

Add Net profit (less Net loss) xxx xxx Less Drawings xxx

Bills receivables

Xxx xxx

Land and building

Xxx

Plant and Machinery

Xxx

Furniture

Xxx

Goodwill

Xxx xxx