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Question
Abnormal Losses such as stock destroyed by fire, goods lost intransit, loss on sale of fixed assets are recorded on the ______ side of the ______.
Options
Debit, trading account
Credit, trading account
Debit, profit and loss account
Credit, profit and loss account
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Solution
Abnormal Losses such as stock destroyed by fire, goods lost intransit, loss on sale of fixed assets are recorded on the Debit side of the Profit and loss account.
Explanation:
Extraordinary expenses and abnormal losses, such as goods lost in transit, loss by fire, Cash defalcations, loss on sale of assets, etc., are debited to the profit and loss account.
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RELATED QUESTIONS
Give a word, term, or phrase which can substitute the following statement:
Expenses paid before it is due.
Give a word, term, or phrase which can substitute the following statement:
The provision made to compensate the loss on account of likely debts.
Correct and Rewrite the following statement:
Capital A/c……………..Dr.
To Profit and Loss Account
(Being Net Profit transferred to Capital A/c)
Give a word, term or phrase which can substitute the following statement:
Account prepared to know Net Profit or Net Loss.
Give a word, term or phrase which can substitute the following statement:
Account prepared to know Net Profit or Net Loss.
Prepare Profit and Loss Account of Sanjay Brothers for the year ended 31st March, 2018 from the following balances.
| 1) | Bank charges | ₹ 22,000 | |
| 2) | Interest (Cr.) | ₹ 16,000 | |
| 3) | Sundry expenses | ₹ 42,000 | |
| 4) | Insurance | ₹ 35,000 | |
| 5) | Salaries | ₹ 40,000 | |
| 6) | Rates and Taxes | ₹ 13,000 | |
| 7) | Postage | ₹ 8,000 | |
| 8) | Advertisement | ₹ 40,000 | |
| 9) | Rent paid | ₹ 32,000 | |
| 10) | Bad debts | ₹ 10,000 | |
| 11) | Commission (Cr) | ₹ 17,500 | |
| 12) | Printing & Stationery | ₹ 21,000 | |
| 13) | Loss by fire | ₹ 18,000 | |
| 14) | Discount (Dr) | ₹ 23,000 | |
| 15) | Discount (Cr) | ₹ 37,000 | |
| 16) | Misc. Income | ₹ 14,000 | |
| 17) | Depreciation | ₹ 34,000 | |
| 18) | Carriage Outwards | ₹ 60,000 | |
| 19) | Godown Expenses | ₹ 40,000 | |
Note: Gross Profit ₹ 4,07,500
It is an account prepared to know the net profit/loss. It is also a nominal account and represents second stage.
What is the purpose of a Profit and Loss Account?
Explain the needs of the Profit and Loss Account.
Which of these expenses would typically NOT appear on the debit side of the Profit and Loss Account?
