P&L A/c in Trial balance..Urgent Sir!!!
This query is : Resolved
11 August 2010
Dear Experts,
Very urgent sir/madam....
I am auditing a firm. In that there is a P&L A/c in the Trial balance.
Since it is a firm profit or loss are normally transferred to partners current a/c so there is no chance saying that p&l a/c represents previous years profit as in the case of companies. My doubt why the p&l account is there in the Trial balance. Please anyone clarify me.
What effect should i give to that p&l balance in the T.B.(i.e whether to show in P&L a/c or B/s).
Your reply is highly appreciated.
With regards,
Rajesh.
Very urgent sir/madam....
I am auditing a firm. In that there is a P&L A/c in the Trial balance.
Since it is a firm profit or loss are normally transferred to partners current a/c so there is no chance saying that p&l a/c represents previous years profit as in the case of companies. My doubt why the p&l account is there in the Trial balance. Please anyone clarify me.
What effect should i give to that p&l balance in the T.B.(i.e whether to show in P&L a/c or B/s).
Your reply is highly appreciated.
With regards,
Rajesh.
11 August 2010
Dear Rajesh, as Prperitership and Partnership profit or loss need to tranfer to the Owner or partner capital a/c. but In companies, it needs to be declared as dividend, also dividend declaration is Board of director decision, so if the dividend not declared the un distributed profit for the particular year remain balance in P&L a/c. the same balance will reflect in TB also
11 August 2010
Dear Rajesh, you are right that profit in the firm is transferred to partners' capital account, so there should be no item as profit and loss account in balance sheet. but there might have been some transaction which the firm has written off by making entries in books of account which can be known only by inspecting the books of account.
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12 August 2010
Please scruitnise the PL account to ascertain how the balance has build up. Dont conclude anything without ascertaining the nature of balance outstanding in the account.
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