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Profit & Loss A/c

Poornima Srinivasan (Junior trainee) (330 Points)

12 March 2010

The result of Profit and loss a/c will be either profit or loss or break even.

Why can't we use Profit or Loss a/c.

Can anyone tell why do we use profit and loss a/c as head to prepare Profit & loss a/c...

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12 Replies

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Kindly see this link for above topic -- https://www.caclubindia.com/forum/re-profit-and-loss-60374.asp

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Fakhrudeen (student) (191 Points)
Replied 12 March 2010

i think since both revenue n expense item appear in this account it may be termed as profit n loss a/c

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 12 March 2010

The normal and common understanding is that the Profit & Loss account is actually a STATEMENT recording various incomes (profits) and expenses (losses) during the year... Its not about the ultimate result, but the incomes/expenses during the year.... Yes, it would have either recorded only incomes or expenses only, then may be we might have called the same as PROFITS OR LOSSES ACCOUNT.....

CA Ayush Agarwal (Kolkata-Pune-Mumbai) (27186 Points)
Replied 12 March 2010

Originally posted by : D н ! я σ ĵ
	The normal and common understanding is that the Profit & Loss account is actually a STATEMENT recording various incomes (profits) and expenses (losses) during the year... Its not about the ultimate result, but the incomes/expenses during the year.... Yes, it would have either recorded only incomes or expenses only, then may be we might have called the same as PROFITS OR LOSSES ACCOUNT.....

Agree With DhiriJ

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 12 March 2010

After the introduction of IFRS it will be Income Statement where Income includes loss also

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Poornima Srinivasan (Junior trainee) (330 Points)
Replied 12 March 2010

My question is ? Is there any said rule to use it.

Poornima Srinivasan (Junior trainee) (330 Points)
Replied 12 March 2010

My question is ? Is there any said rule to use it.

If s...were it is mentioned...

Radhakrishna Das (Articled assistant) (39 Points)
Replied 12 March 2010

Both items that would cause profit and loss appears in the statement and hence is its name. PROFIT AND LOSS.

Poornima Srinivasan (Junior trainee) (330 Points)
Replied 12 March 2010

I am not satisfied with any....I need some more explanations.

Max Payne (employed) (2574 Points)
Replied 12 March 2010

Poornima,

The companies act uses the phrase, profit and loss account, see section 211, 215, 216.

Conceptually, the Profit AND loss account should disclose all gains/profits and all losses/dimunitions in assets, even though the same result could be arrived by not disclosing all material facts.

For eg, there could be Rs.5000 bad debts, and Rs.5000 Forex gain on overseas collectibles. If u dint disclose both items, the result on profit will be same, but it is misleading to the users.

Though the ultimate result is only singular, i.e., profit, loss or break even, can be arrived only by considering ALL gains and profits, and all losses and dimunition in assets. All these need to be properly disclosed as per applicable AS. Hence the phrase PROFIT AND LOSS ACCOUNT

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Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 12 March 2010

Dear Poornima,

Financial Statements comprised of two main elements.

1. Balance Sheet.

2. Profit & loss Account.

Balance Sheet is prepared to the exact financial position, whereas Profit & loss Provides us the exact position about the profitability or otherwise of a Company/firm/or otherwise.

As per Companies Act, Part I & Part II of Schdule VI deals with the Financial statement of a company.

Income earned over revenue is generally termed as profit.

Hence such excess is treated as profit , & in other case Loss......

regards,

ratan