Profit and Loss Account

Example:

Other than Business Expenses that affects the Cost of goods sold, there are other operating expenses which does not affect the cost of goods sold.

Examples of operating expenses:
Wages, Utilities, Advertising, Rent and Interest etc,


There are other income earned by the business besides income from sales of goods

Examples of other income:

Rent received, Commision Received, Interest Received, etc

At the end of the period, the GrossProfit from the Trading A/Cand Other Income and Operating Expenses are Transferred to the Profit and Loss A/c to determine the Net Profit or Net Loss

So, what is profit and loss account?

The profit and loss account summarises a business' trading transactions - income, sales and expenditure - and the resulting profit or loss for a given period.