Financial Statements - I

the later stage and there you will notice how this format undergoes a change with respect to each one of them. Trading and Profit and Loss Account of ABC for the year ended March , Expenses/Losses Revenues/Gains Carriage inwards/ Freight inwards/cartage Gross profit c/d Gross loss b/d xxx xxx Gross loss c/d Gross profit b/d Rent/rates and taxes Inerest received Repairs and renewals Net loss Net profit (transfered to capital account) xxx xxx , either of the items computed Fig. . : A format trading and profit and loss account . . Concept of Gross Profit and Net Profit The trading and profit and loss can be seen as combination of two accounts, viz. Trading account and Profit and Loss account. The trading account or the first part ascertains the gross profit and profit and loss account or the second part ascertains net profit . The trading account ascertains the result from basic operational activities of the business. The basic operational activity involves the manufacturing, purchasing and selling of goods. It is prepared to ascertain whether the selling of goods and/or rendering of services to customers have proved profitable for the business or not. Purchases is one of the main constituents of expenses in