Question

State whether the following statements are True or False:
Net loss is deducted from capital.

Answer 1

True. Net loss is deducted from Capital. Profit and loss account is like any other nominal account which is closed at the end of the year and balance so obtained is transferred to the capital account. Net loss is a debit balance being a loss and hence is deducted from the capital. If it would have been net profit the same will be added to the capital account.