PROFIT AND LOSS ACCOUNT

 

Meaning 

Profit and Loss Account is prepared after Trading Account . Profit and Loss Account is prepared to determine Net Profit earned or net Loss incurred by the business during an accounting period.

" A profit and loss Account is an account into which all gains and losses are collected in order to ascertain the excess of gains over the losses or vice versa ." 

                                                - Prof . Carter 

Featured of Profit and Loss Account

1. It is the second stage in the preparation of the final accounts .

2. It relates to a particular accounting period and is prepared at the end of that period .

3. Accuracy basis of accounting is followed in the preparation of this account .

4.It is credited with the gross profit and income from other sources and debited with indirect expenses and losses .

5. Balance of this account is the net profit or net Loss. 

6. Capital of the owner increase or decrease by the Balance of this account  ( Net Profit or Net Loss) .