Answer / chalapathi rao govada

The main objective of preparing the profit and loss account
is to know what is our netprofit or loss for a given period.

So based on this logic some of us will under an impression
that why can call it as profit or loss account.

But my dear friend just have a look at the logic below.

In the profit and loss account we will record all the
profit transactins and loss transactions.
Eg: profit on sale of a Fixed Assets.
Eg: Profit on Sale of investments in Stock market.

Eg: loss on sale of a capital Asset.
Eg: loss on sale of any security.

And: indirect transacitons which will altemately represents
profit or losses.Like

Sales --------- Major income source.
All revenue items---- Represents the earning capacity of
your organisation
All exp ----------- Which plays vital role in profit and
loss.

Ram retired from partnership. The partners with mutual consent agreed to put the capital balance as on the date of retirement as loan to the firm @ 18% pa. The credit balance to his capital account was Rs 325000/- Pass necessary entry

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