Question

Q: The unfavorable balance of profit and loss account should be
A Subtracted from liability
c Subtracted from current assets
C​

Answer 1

Answer:

subtrqcted from capital is the answer here.

Answer 2

(c) Subtracted from the capital.

The profit and loss account starts from transferring the balance of the Trading account which is the gross profit. Then, all the expenses come in the debit side of the profit and loss account and all incomes and gains come on the credit side. After that, we can find whether the balance of the profit and loss account is favorable ( net profit ) or unfavorable ( net loss ). The favorable balance is added to the capital in the balance sheet. But the unfavorable balance is subtracted from the capital in the balance sheet.