Deepak Thukral
Manager Accounts
Naveent
Statutory Compliance Officer
NAGARAJA
Hr Professional

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Why P&L A/C debit balance(Loss) shown under Assets side Miscellaneous Expenditure ?
From India , Bangalore
hi
dear all
this is naveen
i read the question it is very intresting nagaraj
ans:
Miscellaneous Expenditure is head under assests of Schedule VI of companies act 1956,
When profit earned company is liable to shareholders(owner)
when loss incurred Shareholders(owners) are liable to company
It is because basic concept called "diffrent entity concept" i.e., owner is diffrent and bussines is diffrent
so when loss inurred to business owner should bring that much loss to compnay
and we can written off in future financial years with profits.
this is what I learned so plz reply any one if there is any mistakes.
Thanks and Regards
Naveen.T

From India , Bangalore
Hi all!
I agree with navin. Applying the business entity principle, the profit generated by the business belongs to the owners and hence the business has a liability to pay the profit to them. in the same way loss,is to be borne by the owners. since it is receivable from the owners, it is an asset for the business.
The only point I wish to correct is Loss is not shown as Misc. Expenses. Under item 4 of the Schedule IV, sub item a) is the misc exp not written off abd b) is the P/L account debit balance.Both are separate items
Swarnalata


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.

DEEPAK THUKRAL

CHANDIGARH

From India , Chandigarh
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