Where is bad debts entry in profit and loss account?
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Profit and Loss Account: Provisions for Adjustment, Expenses and Bad Debts!
The Profit and Loss Account starts with the credit from the Trading Account in respect of gross profit (or debit if there is gross loss). Thereafter, all those expenses or losses which have not been debited to the Trading Account are debited to the Profit and Loss Account. If there is any income besides the gross profit, it will also be transferred to the credit of the Profit and Loss Account.
A fundamental principle for preparing the Trading and Profit and Loss Account is that the expenses and incomes for the full trading period, but only for the trading period, are taken to the Trading Account and the Profit and Loss Account. This means that if an expense has been incurred but not yet paid for, a liability for the unpaid amount must be created before the accounts can be said to show a true picture.
The Profit and Loss Account starts with the credit from the Trading Account in respect of gross profit (or debit if there is gross loss). Thereafter, all those expenses or losses which have not been debited to the Trading Account are debited to the Profit and Loss Account. If there is any income besides the gross profit, it will also be transferred to the credit of the Profit and Loss Account.
A fundamental principle for preparing the Trading and Profit and Loss Account is that the expenses and incomes for the full trading period, but only for the trading period, are taken to the Trading Account and the Profit and Loss Account. This means that if an expense has been incurred but not yet paid for, a liability for the unpaid amount must be created before the accounts can be said to show a true picture.
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Debit side of profit and loss account
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