Concept And Meaning Of Profit And Loss Account

Profit and loss account is prepared after the preparation of trading account.The main objective of preparing profit and loss account is to achieve the operating results of a company at the end of accounting period. Profit and loss account is a nominal account having debit side and credit side. All the indirect expenses are recorded in the debit side of the profit and loss account and all the incomes except sales and closing stocks are recorded in the credit side of the profit and loss account. In profit and loss account if debit side is excess the credit side , the difference is called net loss. If the credit side of profit and loss account is excess than the debit side ,the difference is called net profit. Net profit amount of profit and loss account is transferred to the credit of profit and loss appropriation account and net loss of profit and account is transferred to the debit side of profit and loss appropriation account. Profit and loss account helps to ascertain net profit or net loss from business operation.