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Items included in profit and loss account

The profit and loss account keeps the record of indirect incomes and gains on the credit side and indirect expenses and loss on the debit side, items included in the debit column and credit column of the profit and loss account are as follows.

Inclining graphs shows profit

Debit items

1. Gross loss

Gross loss either by trading account or giving in question is recorded into the debit side of profit and loss account as the first debit item of profit and loss account.

2. Indirect expenses

The expense is not allocated directly for the direct output and indirect expenses. It includes office and administrative expenses, selling and distribution expenses, financial expenses, depreciation, repair and maintenance expenses, financial expenses, depreciation, miscellaneous expenses, etc.

a. Office and administrative expenses

Expenses are included in the process of operating the business of office and administrative expenses. It includes salary, rent, and rates, insurance, printing and stationery, communication, legal charge, audit fee, directors fee, general expenses, tax, entertainment expenses, license, etc.

b. Selling and distribution expenses

Expenses that are incurred in the process of selling and distribution of goods in the market are selling and distribution, expenses. It includes salesman salary, Commission to agent, travelling expenses, sales tax, packing charge, go down rent, carriage outward, bad debt, export duty, e discount on sales, advertisement, distribution off free sample etc.

c. Financial expenses

Expenses incurred for generating and supplying financial resources are financial expenses. It includes interest on capital, interest on the loan, bank charge, interest on Bank overdraft, cash discount etc.

d. Depreciation, repair, and maintenance expenses

Depreciation decreases the value of fixed assets due to their continuous use. It includes the repair and renewal of fixed assets. It also includes the amortization or written off of intangible fixed assets like Goodwill returns off, patent written off, etc. An expense incurred for maintaining the work efficiency of the assist our maintenance expenses. It includes depreciation on fixed assets like a plant. Machine, furniture, computer, etc., and loss on revaluation of assets.

e. Miscellaneous expenses

Miscellaneous expenses are the expense other than those mention above. This expense includes charity, donation, provision for bad and doubtful debt, loss on sales of fixed assets, laws of good on transit etc.

Items included in the credit side of the profit and loss account

Credit items

1. Gross profit

 Gross profit other shows by trading account or giving in question is credit in profit and loss account as the first credit item of P and L account.

2. Indirect income and revenue

The operating income rather than sales are in direct income. It includes rent received, discount received, Commission received, bad debt recovered, trade debt recovered, apprenticeship premium etc.

3. NonTrading income and gain

The income which are from nontrading activities is nontrading income. It includes interest on investment, dividends received, etc.

4. Abnormal gain

During the course of business, it may on some capital gain which are known as abnormal gain. It includes profit on sales of fixed assets, appreciation of assets, etc.

5. Other incomes

The business may have some other sources of income it is also recorded in to create a side of profit and loss accounts are considered as other income.


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