Why do we use profit and loss account instead of profit or loss account ?
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- Answer:
What is profit and loss account?
What is profit and loss account?A profit and loss accont is a general ledger accont that must be closed every year when finalizing the financial statements.
What is profit and loss account?A profit and loss accont is a general ledger accont that must be closed every year when finalizing the financial statements.During the year two types of acconts will be recognized. A balance sheet account (assets and liabilities), which will be disclosed in the statement of financial position and a nominal account (incomes and expenses) which will be disclosed on the statement of total comprehensive income.
What is profit and loss account?A profit and loss accont is a general ledger accont that must be closed every year when finalizing the financial statements.During the year two types of acconts will be recognized. A balance sheet account (assets and liabilities), which will be disclosed in the statement of financial position and a nominal account (incomes and expenses) which will be disclosed on the statement of total comprehensive income.Now, every debit must have a credit. When a balance sheet item is created, it is typically by debiting an asset accont and crediting another asset or liability accont. These transactions are capital in nature and will not be involved in profit and loss.
What is profit and loss account?A profit and loss accont is a general ledger accont that must be closed every year when finalizing the financial statements.During the year two types of acconts will be recognized. A balance sheet account (assets and liabilities), which will be disclosed in the statement of financial position and a nominal account (incomes and expenses) which will be disclosed on the statement of total comprehensive income.Now, every debit must have a credit. When a balance sheet item is created, it is typically by debiting an asset accont and crediting another asset or liability accont. These transactions are capital in nature and will not be involved in profit and loss.Some transactions with balance sheet accouts, however, will result in the creation of a nominal account. These transactions are incomes and expenses that we use to measure our profit for the year.
What is profit and loss account?A profit and loss accont is a general ledger accont that must be closed every year when finalizing the financial statements.During the year two types of acconts will be recognized. A balance sheet account (assets and liabilities), which will be disclosed in the statement of financial position and a nominal account (incomes and expenses) which will be disclosed on the statement of total comprehensive income.Now, every debit must have a credit. When a balance sheet item is created, it is typically by debiting an asset accont and crediting another asset or liability accont. These transactions are capital in nature and will not be involved in profit and loss.Some transactions with balance sheet accouts, however, will result in the creation of a nominal account. These transactions are incomes and expenses that we use to measure our profit for the year.However, a nominal accont, after it has been created is not allowed to exist in the following year. So at the end of every year it must be closed off to the profit and loss account which when balanced will be equal to your net profit for the year.
Explanation:
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