Profit and loss account is made to ascertain annual profit or loss of business. Only indirect expenses are shown in this account. All the items of revenue and expenses whether cash or non-cash are considered in this account. Understand the concept of Trading Account here in detail. #hstutorial Trading Profit and Loss Account Format - Income Statement guide and principles. This format is well detailed to help you understand clearly the concepts, uses, and elements of an filexlib. Trading,profit and loss account and its use The last step in the accounting cycle involves determination of the trading profit/loss also known as gross profit/loss whereby a trading account is utilized for that purpose. Then further analysis is performed to determine the net profit or net loss by establishing a profit and loss account. Profit and Loss formula is used in mathematics to determine the price of a commodity in the market and understand how profitable a business is. Every product has a cost price and a selling price. Based on the values of these prices, we can calculate the profit gained or the loss incurred for a particular product.
A profit and loss account starts with the TRADING ACCOUNT and then takes into account all the other expenses associated with the business. Trading account The trading account shows the income from sales and the direct costs of making those sales. It includes the balance of stocks at the start and end of the year.

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