Trading and Profit & loss Account
Trading & Profit & Loss account are prepared to determine the profit earned or loss sustained by the business enterprise during the accounting period. It is basically a summary of the revenues and expenses of the business and calculates the net figure termed as profit or loss. Profit is revenue for fewer expenses. If expenses are more than revenues, the figure is termed as a loss.
Trading and Profit and Loss account summarize the performance for an accounting period. It is achieved by transferring the balances of revenues and expenses to the trading and profit and loss account from the trial balance. Trading and Profit and Loss account is also an account with Debit and Credit sides. It can be observed that debit balances (representing expenses) and losses are transferred to the debit side of the Trading and a Profit and Loss account and credit balance (representing revenues/gains) are transferred to its credit side.
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