Please clear my confusion

A/c entries 167 views 3 replies

Rehan khan

Student

4 Points Joined 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)

prasad Nilugal

3924 Points Joined December 2017

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 .