what is debit balance of p&l a/c show in asset side of b/s?
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Answer Posted / bhupender janmejai
YOU KNOW BOTH THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ARE PREPARED FROM THE TRIAL BALANCE, THE BOTH SIDES OF WHICH ARE SUPPOSED TO TALLY. NOW IN THE TRIAL BALANCE, EITHER THERE ARE DEBIT BALANCES OR CREDIT BALANCES. DEBIT BALANCES REPRESENT ITEMS OF EXPENSES OR ASSETS. SIMILARLY CREDIT SIDE REPRESENT INCOMES OR LIABILITIES. FROM THE DEBIT SIDE OF THE TRIAL BALANCE, ASSET ITEMS ARE TAKEN TO THE BALANCE SHEET AND THE EXPENSES ITEMS ARE TAKEN TO THE PROFIT AND LOSS ACCOUT. FOLLOWING THE SAME PROCEDURE, THE INCOME ITEMS ARE TAKEN TO THE PROFIT AND LOSS ACCOUNT AND LIABILITY ITEMS ARE TAKEN TO THE BALANCE SHEET. IF THE PROFIT
AND LOSS ACCOUNT SO COMPUTED SHOWS PROFIT,
IT IS TAKEN TO LIABILITY SIDE OF THE BALANCE
SHEET AND ULTIMATLEY TRANSFERRED TO THE
CAPITAL ACCOUNT OR SHOWN AS RESERVES ETC.
BUT IF THERE IS A LOSS THE SAME IS SHOWN
AS ASSET IN THE BALANCE SHEET PENDING
TRANSFER OF THE SAME TO THE CAPITAL ACCOUNT.
THE SAME CAN BE DEDUCTED FROM THE CAPITAL
ACCOUNT AND THE NET AMOUNT CAN BE SHOWN
APPEARING IN THE LIABILITY SIDE OF THE
BALANCE SHEET.
THUS WE CAN CONCLUDE THAT IT IS SHOWN ON
THE DEBIT SIDE OF THE BALANCE SHEET
PENDING TRANSFER OF THE SAME TO THE CAPITAL
ACCOUNT. ONCE IT IS TRANSFERRED TO THE
CAPITAL ACCOUNT, YOU WILL NOT FIND IT IN
THE ASSET SIDE.
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