The net profit or loss for the year is determined in profit and loss account after
Answer Details
The net profit or loss for the year is determined in the profit and loss account after eliminating all expenses from gross profit and adding any other income.
The profit and loss account, also known as the income statement, is a financial statement that shows a company's revenues, expenses, and net profit or loss over a specific period, typically a year. It starts with the gross profit, which is the difference between the sales revenue and the cost of goods sold.
After calculating the gross profit, all other expenses related to the company's operations are deducted from it, including administrative expenses, selling expenses, depreciation, and interest expenses. This gives us the operating profit, which is the profit earned from the company's core operations.
Next, any non-operating income, such as interest earned on investments, is added to the operating profit. Non-operating expenses, such as interest paid on loans, are deducted from the operating profit.
Finally, any taxes due are deducted from the total income, and the resulting figure is the net profit or loss for the year.
Therefore, the net profit or loss for the year is determined in the profit and loss account after eliminating all expenses from gross profit and adding any other income.