Question

What is meant by closing balance of p/l a/c ? Does it include past years profit as well?

Answer 1

Dear Student



Closing balance of profit and loss account is the balance which is left over after any appropriation or transfer to reserves.
Yes, It may include the leftover balance of previous years profit as well.
i.e Suppose Current Year profit = 1,00,000/-
Opening balance of profit and loss account = 2,00,000/-
Transfer to Reserves = 75,000/-

Therefore closing balance of profit and loss account = Opening + Current year profit - Transfer = 2,25,000/-
Hence it included previous years profit as well.


Regards