While preparing trading and profit and loss a/c _________ is made.

distinction between revenue and capital expenditure

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

distinction between cash and non cash outlay

No worries! We‘ve got your back. Try BYJU‘S free classes today!

materiality of transaction

No worries! We‘ve got your back. Try BYJU‘S free classes today!

market effect of the transaction

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Open in App

Solution

The correct option is A distinction between revenue and capital expenditure
Revenue expenditure are those which are incurred for normal business operations. Salary, Rent, Insurance, wages etc are the examples of revenue expense.

Capital expenditure are those , of which the benefit is arises to the business for more than a year. Examples are plant, equipment, furniture etc. These are shown in balance sheet as asset.

Hence, while preparing trading and profit & loss account, distinction between revenue and captial expenditure is necessarily to be made.

Suggest Corrections

Similar questions

Q. Select the most appropriate alternative from those given below and rewrite the statement.

Final accounts are prepared on the basis of _________________ and adjustments.
a) trial balance
b) capital A/c
c) trading A/c
d) profit and loss A/c

Q. Which of the following would not be considered a non-cash investing and financing activity in preparing a statement of cash flows?

Classify the following into (i) Operating Acivities, (ii) Investing Activities, (iii) Financing Activities and (iv) Cash Equivalents while preparing a Cash Flow Statement:
1. Cash Sales
2. Cash Received from Trade Receivables
3. Purchase of Building
4. Sale of Building
5. Issue of Share Capital or Debentures
6. Buy- back of Equity Shares
7. Dividend Paid
8. Interest paid on Debentures or Long - term Loans by (a) Finance Company (b) Non- Finance Company
9. Cash Purchases
10. Cash paid to trade payables
11. Redemption of Debentures and Preference Shares
12. Repayment of Long - term Loan
13. Office Expenses
14. Selling and Distribution Expenses
15. Manufacturing Expenses
16. Purchase of Goodwill
17. Sale of Patent
18. Purchase of Investments
19. Sale of Investments by (a) Finance Company (b) Non- Finance Company
20. Commission and Royalty received
21. Interest received on Investments by (a) Finance company (b) Non Finance company
22. Dividend received on Shares by (a) Finance Company (b) Non - Finance company
23. Rent Paid
24. Rent received if (a) Company's main business is property business (b) Other business
25. Income Tax Paid
26. Income Tax Refund received
27. Bank Balance
28. Short- term Deposits in Bank
29. Investment in Short - term or Marketable Securities

Following is the trial balance of J Subramanium on 31st March, 2016. Prepare the trading and profit and loss account for the year ended 31st March, 2016.

Trial Balance
as on 31st March, 2016
$\begin{matrix} Name of Account & Debit (Rs.) & Credit (Rs.) Capital A/c & 30, 000 Stock A/C (1st April, 2015) & 6, 000 Cash at Bank & 3, 000 Cash in Hand & 1, 320 Machinery A/c & 18, 000 Furniture and Fittings A/c & 4, 080 Purchases A/c & 45, 000 Wages A/c & 30, 000 Fuel and Power A/c & 9, 000 Factory Lighting A/c & 600 Salaries A/c & 21, 000 Discount Allowed A/c & 1, 500 Discount Received A/c & 900 Advertising A/c & 15, 000 Sundry Office Expenses A/c & 12, 000 Sales A/c & 1, 50, 000 Sundry Debtors & 25, 500 Sundry Creditors & 11, 100 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 1, 92, 000 - -------- - - -------- - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 1, 92, 000 - --------- - - --------- - \end{matrix}$

Closing stock was valued at Rs. 8,100

Depreciation is a non-cash expense which should not be provided for in the profit and loss account. Comment.

Join BYJU'S Learning Program