Question

XYZ club has a bar that maintains a separate trading account for its trading activities. Which of the following is the treatment of profit or loss on bar trading activities ?

• A. Profit or loss is directly shown in the balance sheet
• B. Profit or loss is to be presented in income and expenditure account
• C. Profit or loss is credit in income statement
• D. Profit or loss is added to accumulated fund

Answer 1

The correct option is B Profit or loss is to be presented in income and expenditure account

Trading account is prepared by any firm to record all those entries which are related to some kind of economic transaction of the business.

XYZ club has to record it profit or loss in the income and expenditure account because the profit or loss is that amount which is not related with any kind of economic transaction of the business.