Question

What will be the journal entry for Gross profit.

Answer 1

We will have Journal entries for Transactions present in the trading a/c but not for the final result of trading a/c ...i.e., Gross profit ( if the result is positive) and Gross Loss (if the result is negative).. Gross profit is the excess of Sales income and closing stock over stock,purchases,manufacturing,direct and unavoidable expenses...But inorder to ascertain profit exactly..we should should consider all indirect expenses and other forms of income also..for this purpose we will prepare Profit and Loss a/c ... So we should pass a transfer entry and not a Journal Entry ...

The transfer entry will be....

incase of Gross profit

Trading a/c Dr. xxxx

To. Profit and Loss a/c . xxxx

(Being gross profit transfered to profit and Loss a/c)


Incase of Gross Loss

Profit and Loss a/c Dr xxxx

To Trading a/c. xxxxx

(Being gross loss transfered to profit and Loss a/c)