PROFIT AND LOSS ACCOUNT
Profit & Loss Account: This is an account prepared after the preparation of the Trading Account. It is debited with all operational expenses and credited with the gross profit and all other revenue accruing to a business.
Purpose of Preparing the Profit & Loss Account
The P&L account is prepared either to ascertain net profit or net loss.
Worked Example:
Question: From the trial balance of Diligent Stores Ltd above, you are required to prepare the Profit and Loss Account of the company for the year ended 31st December, 2009.
Solution
DILIGENT STORES LTD
Profit & Loss Account for the year ended 31st December 2009.
N N
Less EXPENSES: Gross profit brought 7,165
Carriage outwards 200 down from Trading
Salaries and wages 3,862 Account 7,165
Rent 304
Insurance 74
Sundry expenses 664
Advertising 216
General expenses 480
NET PROFIT 1,361
______ ________
7,165 7,165
