Question

How to do Trading Profit and Loss

Explain with example

Answer 1

What is the Profit and Loss Account?

The profit and loss account is opened by recording the gross profit on the credit side or gross loss on the debit side.

For earning the net profit, a businessman has to incur many more expenses in addition to the direct expenses. Those expenses are deducted from profit or added to gross loss and thus, the resultant figure will be net profit or net loss.

Expenses included in the profit and loss account are Selling and distribution expenses, Freight & carriage on sales, Sales tax, Administrative Expenses, Financial Expenses, Maintenance, depreciation and Provisions and more. On the credit side, Discount received, Commission received, Profit on sale of assets and more appear.

Solved Question for You

Question: The following trial balance has been taken out from the books of XYZ as on 31st December 2009.

 ParticularsDr.Cr.Plant and Machinery100,000Opening stock60,000Purchases160,000Building170,000Carriage inward3,400Carriage outward5,000Wages32,000Sundry debtors100,000Salaries24,000Furniture36,000Trade expense12,000Discount on sales1,900Advertisement5,000Bad debts1,800Drawings10,000Bills receivable50,000Insurance4,400Bank balances20,000Sales480,000Interest received2,000Sundry creditors40,000Bank loan100,000Discount on purchases2,000Capital171,500

Answer 2

It is easy to do trading and profit and loss account...
Actually trading and profit and loss account are two different accounts..
Trading account is the one account and profit and loss account is the other account..

But to prepare final accounts we have to combine these two accounts.

To easily solve this account... We first tick the items which r to be recorded under trading account. These may be income or expense.. But one thing is that these trading account is relating to factory income and expenses...

So we have to find factory income such as sales, closing stock etc... Expenses such as wages, purchases, opening stock, carriage inward, manufacturing expenses etc...

After recording that expenses or incomes... If income side is more than expense i. E debit side... Than balance will be gross profit and shown on debit side with " To gross profit".. But whenever there is increased in expense side with income side it would be shown with "By gross loss" on credit side...

After find out gross profit or gross loss... Transfer same to debit or credit side of profit and loss account... If there is gross profit transfer to credit side of p&l account. If there is gross loss it would transfer to debit side of p&l account.

After that see the office expense and income because all these are recorded in p&l account.

Income side recorded items like discount received, commission earned, etc.
Expense such as carriage outward, office expense, rent, salary, taxes, etc....

If income side more balance shown on debit side with "To net profit"...
If expense side more balance shown on credit side with "By net loss."

These both are transfer to balance sheet...
And if net loss ia there it deducted from capital but if there is profit than added from capital... From Liability side...

Thankxxx... ☺☺⭐⭐⭐ Hope u. Helpful from that