hi
my name is iqbal and i am new in accounting, i find it difficult to understan which accounts affect the trading and profit and loss account when balacing the T accounts. Please could you help me or give me a system to remember which are transferred to the P/L account.
salaam, Iqbal
in any trading organisation, there is the need to determine how much profit is made before deducting expenses and, to enable this to be done easily, the account split into two sections- the trading account and the profit and loss account. the trading account determine grosss profit by establishing the excess of sale over cost ofgood sold. the profit and loss account determines the profit, or loss, for the period by deducting from the gross profit all other expenses.
so the trading account comprises sales (adjest for openning and closing debtor), purchases (adjusted for openning and closing creditor) and openning and closing stock. the profit and loss account starts with the gross profit figure and from this are deducted all expenses normally categorised as administration expenses, sales expenses, distribution expenses and financial expenses.
S A DAR
Thank you very much sajjad