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Unit 2: Understanding Corporate Financial Statements




             The receipts which arise out of normal course of a business are known as Revenue Receipts.   Notes
             For example, income from sale of goods.

          The proforma of Profit & Loss Account is given below:

                                    Proforma of Profit & Loss Account

                                 Profit and loss a/c for the year ending…….
                   To Gross Loss B/d        XXXX        By Gross Profi t B/d    XXXX
                    Balancing fi gure                     Balancing Figure
           Office and Administrative Expenses

           To Salaries
           To Rent, Rates and Taxes                 By Rent received
           To Offi ce Lighting
           To Printing and Stationery
           To Insurance premium
           To postage
           To General expenses
           To Miscellaneous expenses
           Selling and Distribution Expenses
           To Salary to sales staff
           To Commission charges                    By Commission received
           To Advertising expenses
           To Carriage outward
           To Bad debts
           To Packing expenses
           Financial Expenses
           To Interest on capital                   By Interest on drawings
           To Interest on loans                     By Interest on investments
           To Trade discount allowed                By Trade discount received
           To Cash discount allowed                 By Cash discount received
           Maintenance Expenses
           To Depreciation on Fixed assets
           To Repairs and maintenance of
           Productive Assets

           To loss on sale of assets                To Profit on sale of assets
           Other Expenses
           To Provision for debts
           To Net profit c/d*                        By Net loss c/d**

          The balancing process of the profit and loss account leads to two different categories:


               Net profit is the resultant of excess of income in the credit side over the expenses in the
               debit side of the Profit and Loss account.

               Net Loss is an outcome of excess of expenses in the debit side over the incomes in the credit
               side.










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