These final tallies are prepared for a specific period. The final accounts consist of trading account, profit and loss account, and balance sheet.
Trading, Profit and Loss Account
Describe what a Trading, profit and Loss account is
GROSS PROFIT=SALES-COST OF GOODS SOLD
A profit and loss statement (P&L) is a financial statement that
summarizes the revenues, costs and expenses incurred during a specific
period of time, usually a fiscal quarter or year. These records provide
information about a company’s ability –or lack thereof –to generate
profit by increasing revenue, reducing costs, or both. The P&L
statement is also referred to as “statement of profit and loss”, “income
statement,” “statement of operations,” “statement of financial
results,” and “income and expense statement.”
EXAMPLE
Trial Balance as on 31st March, 2007
Closing stock is valued at the cost of Rs. 15,000 while its market price is Rs.18,000.
On 31st March, 2007 the stock of stationery was Rs. 500.
Provide reserve for bad and doubtful debts at 5% on debtors.
Depreciate building at 5% and patent rights at 10%.
Interest on capitals is to be provided at 5% p.a
Determine the Gross profit or Gross Loss
