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profit AND loss

CA Sneha (C.A ) (450 Points)

21 December 2009

does anybody knw why we use AND in Profit and loss A/c as v either get profit or v get loss we dont get both . so it should be profit or loss a/c..

this Question was asked in an interview..

Do reply what would u have said if u would have been asked d same

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22 Replies

S Hariprasad (student) (128 Points)
Replied 21 December 2009

since all incomes are profits and all expenses are losses we use profit and loss

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 21 December 2009

Ya..

The normal and common understanding is that the Profit & Loss account is actually a STATEMENT recording various incomes (profits) and expenses (losses) during the year... Its not about the ultimate result, but the incomes/expenses during the year.... Yes, it would have either recorded only incomes or expenses only, then may be we might have called the same as PROFITS OR LOSSES ACCOUNT.....

But as such, i know this is not satisfying answer as its just one's understanding, not satisfying even for me myself... I would look forward for some genuine answer

CA Sneha (C.A ) (450 Points)
Replied 21 December 2009

one answer could be to maintain consistency as it wont be sensible some companies giving profit a/c and some loss a/c

n other could be that in profit prior to incorporation v can get both loss and profit

thanks for replying but still even m searching for proper ans

Parag Shah (aaa) (22 Points)
Replied 21 December 2009

Its because we record the profits or losses for each and every individual transaction and do take the whole as such. Each and every transaction needn't end up with only profit nor loss. Hence it may be either of them. Since we look at each and every individual transaction, we call it as profit and loss account than profit or loss account.

rgds

Parag P Shah

Sandeep Keswani (Tax Consultant) (1064 Points)
Replied 21 December 2009

Dhiraj ur answer is convincing. Profit & Loss A/c. is a statement recording Incomes and Losses / Expenses.

To assert my point further, consider the accounts of Professionals where it is called "Income & Expenditure A/c." Even in that case we have either Excess of Income over Expenditure or vice versa as the end result, but not both.

Therefore the word "and" is used in Profit & Loss A/c. to signify both Incomes and Expenses.

Argument put up by Sneha about consistency is also acceptable.

BUT I must say........such good arguments may not also click when facing an interview. Hope this discussion can help someone in future.

CA SURENDRA KUMAR RAKHECHA (Practising CA at Surat) (26258 Points)
Replied 21 December 2009

So far we are following some traditions in the accounting.

To use the words for determination of financial results - Profit & Loss a/c are required by the Companies Act, 1956. This is the heading prescribed by the law.

As the new developments are going on; in IFRS we will use INCOME STATEMENT. Income might be positive or negative.

Rakesh Bansal (CA) (75 Points)
Replied 22 December 2009

dear sneha... profit and loss a/c term is given by law...its not made by us....we are following language of law.... hence dnt bother by wt name its called.... and there is one reason we usally records sum profit as wel as sum losses in p&l a/c ..... this is not related to ultimate profit or loss earned by companies so thats why its a profit and loss a/c..................................but now as per latest IFRS conversion p&l a/c will be known as comprihensive income statement....

ALL D BEST

Sandeep Keswani (Tax Consultant) (1064 Points)
Replied 22 December 2009

Well said Surendra Sir.........Thank you.

manish (Article Assitant) (358 Points)
Replied 22 December 2009

Nice Question, Profit and loss A/c refers to the mixture A/c of profit A/c and loss a/c. If we use the term Profit or loss a/c then we have to prepare profit a/c, loss a/c seperately.

(Guest)

As per General clauses Act .. the term profit includes losses also... so if an accountant wants to knw business performance as on date, he s not aware of the end result. As profit includes losses , we write Profit and Loss A/c.

(Guest)

since profit includes losses, that is also the reason we write Profit And loss Appropriation A/c. At the end if we get profit(loss) we wil make transfer to repective parties or to some heads of A/c.

(Guest)

Originally posted by : Sandeep Keswani
	Dhiraj ur answer is convincing. Profit & Loss A/c. is a statement recording Incomes and Losses / Expenses. To assert my point further, consider the accounts of Professionals where it is called "Income & Expenditure A/c." Even in that case we have either Excess of Income over Expenditure or vice versa as the end result, but not both. Therefore the word "and" is used in Profit & Loss A/c. to signify both Incomes and Expenses. Argument put up by Sneha about consistency is also acceptable. BUT I must say........such good arguments may not also click when facing an interview. Hope this discussion can help someone in future.

CA. Akhil Maangal (Head - Finance & Accouunts) (131 Points)
Replied 22 December 2009

Really nice question... In our Professional life we prepare atleast a Profit & Loss A/c daily but very few are known of this. Very satisfactory answer given by sudarshan sir. thanx sir. And also thanx to Sneha, who gave us a nice question...

diwakar (Dy. Manager -A./c) (24 Points)
Replied 22 December 2009

i agree to Mr. Manish if we use proffit or Loss a/c then we have to prepare Proffit a/c, Loss a/c............. & i can/t use in B/s in proffit or loss a/c there sould be either proffit a/c or Loss a/c