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Please clear my confusion

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Rehan khan

Student

4 Points Posted on 17 July 2020

Hello all.... This is my first post....just started learning accounting......I have a very basic question which has been torturing me for days.....

How can we debit loss by fire directly to trading or p & l account?

Are trading account/p & l account just like ledger accounts...I know every transaction affects two accounts....like cash and building, cash and notes payable etc....Can esome transactions affect cash and trading account, or building and p&l account?

And which type of account is trading account....asset, liability or revenue/expenses/capital?

Replies (3)

Quick Summary

This post clarifies fundamental accounting questions for a beginner. It explains how losses, such as those from fire, are debited to the Profit & Loss account, detailing the necessary journal entries. The discussion also differentiates between ledger accounts and the Trading & P&L statements, defining the latter as statements used to ascertain business profit or loss. Finally, it touches upon the treatment of closing stock and how software like Tally might handle such entries.

prasad Nilugal

3924 Points Posted on 17 July 2020

We are not directly debit loss by fire to P&L account , before that we have pass entry

Loss by fire A/c Dr

To Purchases A/c. Cr

( Goods. distroyed by fire )

After this we transfer loss by fire account to Profit and loss account . So entry will be

Profit and loss A/c Dr

To Loss by fire. A/c. Cr

( being loss transfer to P & L account )

2) Trading and Profit & Loss is not ledger accounts , It's Statement to ascertain Profit or loss during the year by the business entity .