Question

State True or False.
Statement of profit is just like Profit and Loss Account.

Options

• True

• False

Answer 1

False

Explanation: Statement of Profit is not like Profit and Loss Account. It is calculated as shown:
Capital at the end
Add: Drawings made during the year
Less: Additional Capital introduced during the year
Less: Capital in the beginning
Profit or loss for the year
Profit and Loss Account consists of expenses incurred and income earned during the accounting period, whereas Statement of Profit or Loss is prepared to calculate the profit earned or loss suffered (using Opening and Closing Capital).