Question

What's the accounting treatment for losse tools as on 1.4.18 in final accounts?​

Answer 1

Answer:

The Profit and Loss Account also called the Income Statement is similar to the aforementioned Trading Account, while the Trading account calculates Gross Profit (the profit earned before all other expenses have been deducted) the Profit and Loss account calculates net profit (the profit after all indirect expenses have been deducted from the Gross Profit).

Gross Profit – Indirect Costs (Overheads) = Net Profit

Therefore the Profit and Loss Account takes into consideration all other expenses that the business has incurred included the Cost of Production (Cost of Sales). The P&L (an abbreviation for Profit and Loss) reflects a period of time in which the Business Organizations economic activity took place and reflected these inflows and outflows for a period ending on a specific date.

Explanation:

Appropriation account

Once the net profit has been determined in the Profit and Loss account, the net profit is distributed. The role of the Appropriation Account is to record how the net profit is distributed (or appropriated). This distribution could be towards dividends or payment to shareholders and reserve accounts or retained earnings. Therefore the appropriations account is prepared after the Profit and Loss account.