Department of Technical Education

Government of Andhra Pradesh

Name : N.sambaiah
Designation : Head of Section
Branch : DCCP
Instititute : Suvr & SR Govt.Polytechnic
for Women, Ethamukkala.
Year : I year
Subject : Accountancy –I
Subject code : CCP-102
Topic : Final Accounts Duration
: 50 minutes
Sub-topic : Preparation of P & L Account
(without adjustments)
Teaching a aids : PPTs
CCP102.127 1
Objectives

On completion of the period you would be able

prepare
 Profit and Loss Account (without adjustments)

CCP102.127 2
Recap

In the previous class, you learnt

 Format of P&L A/c
 Items appearing on debit and credit side of P&L
A/c

CCP102.127 3
Illustration-1

From the following information, prepare profit and loss

account for the year ending 31-12-2007.

Salaries Rs.4000 Bad debts 800

Carriage outwards 2000 Commission received1200
Printing and stationery 500 Rent received 700
Discount allowed 1000 Office rent & rates 1800
Postage and telegrams500 General expenses 200
Repairs 400 Gross profit 15000
Audit fee 600
CCP102.127 4
 Solution
Profit & loss account for the year ending 31-12-2007

Dr. Cr.
Particulars Amount Particulars Amount

Rs. Rs. Ps
To salaries 4000 By gross profit b/d 15000
To carriage outwards 2000 By commission received 1200
To printing & stationery 1500 By rent received 700
To discount allowed 1000
To postage and telegrams 500
To repairs 400
To audit fee 600
To bad debts 800
To office rent & rates 1800
To general expenses 200
To net profit (transferred to 4100
capital account) ------------- -------------
16900 16900
-------------- --------------

CCP102.127 5
Explanation to select items on debit side

 Discount allowed: while collecting the amounts from

customers , the trader allows some discounts for
quick recovery. It is a loss to the firm and hence
debited to profit and loss account

CCP102.127 6
Explanation to select items on debit side

 Audit fee: fees paid to auditors for their services

to the firm. It is a part of the office expenditure
 Bad debts: Some amounts due from customers
can be collected to due various reasons such as
insolvency, death of a customer etc. This is a loss
to the firm. Hence it is debited to profit and loss
account

CCP102.127 7
Explanation to select items on debit side
 Gross profit/loss: transferred from trading
account

CCP102.127 8
Net Profit or Net Loss

 The total of the credit balances is more than total of

debit balances – the excess of credit balance is
net profit. This net profit is transferred to capital
account
 The total of the debit balances is more than total of
credit balances – the excess of debit balance is net
loss. This net loss is transferred to capital account

CCP102.127 9
 Summary

 Preparation of profit and loss account is a second

stage in final accounts
 After preparation of profit and loss account, the
trader will prepare balance sheet, which is a final
step in final account

CCP102.127 10
 QUIZ

1. Carriage outward appears on

a) Cr. Side of trading A/c
b) Dr. side of P&L A/c
c) Balance Sheet
d) None of the above

CCP102.127 11
1. Carriage inward appears on
a) P&L A/c - Dr. side
b) P&L A/c - Cr. Side
c) Trading A/c - Dr. side
d) None of the above

CCP102.127 12
Assignment
1) Prepare profit and loss account from the following for the
year ended 31.3.2007.
Gross profit Rs. 20000
Salaries 4000
Carriage outwards 600
Postage and telephone 900
Printing and stationery 500
Office insurance 300
Interest paid 600
Advertisement 1000
Commission paid 800
Discount received 600
Rents received 500
Interest on investment 200
CCP102.127 13
Bad debts 800