b23 Closing Entries: The transaction related to profit and loss, transferred into P&L Account is called Closing Entries. 1) Closing entries on Debit side of profit and loss A/c P & L A/C Dr To Salaries A/C To Salaries and Wages A/C To Rent, Rates and Taxes A/c To Carriage Outward A/c To Interest on Loan A/C To General Exp. A/c (Debit balance of nominal A/cs transferred to P&LA/c) Closing entries on Credit side of Profit and Loss Rent Received A/C Dr. Discount Received A/C Dr. Profit on Sales of Asset A/c Dr. To P&LA/C (Credit balance of nominal/A/cs transferred to P&L a/c) 2) Transfer of Net Profit to Capital Account: P&LA/C Dr. To Capital A/C (Net Profit transferred to Capital A/c) a3) Transfer of Gross Loss into Capital A/c: Capital A/c Dr. To P&LA/C (Net Loss transferred to Capital A/c) Profit is divided into Operating Profit and Net Profit . The profit which is generated from the operations of business is called Operating Profit. So in P&L A/c transactions like indirect expenses, gross profit, received commission etc. which is related to business operation are written and difference in debit and credit side is called Operating Profit. After the adjustment of financial expenses and non-business items in this profit, Net Profit is calculated. Example 08: From the following information prepare P&L A/c for Year ending 31 "March 2017 Particulars Amount Particulars Amount Gross profit 20,50,500 Unproductive Expenses 30,000 Selling Expenses 51,000 Travelling Expenses 22,000 Office Rent 75,000 Miscellaneous Receipt 5,000 Trade Expenses 20,000 Export duty 20,000 Carriage Outward 90,000 Stable Expenses 10,000 Office Salary 1,50,000 Interest on Loan 20,000 Postage & Telegram 7,000 Discount received 6,000 Legal Charges 2,000 Bad Debts 10,000 Audit Fees 10,000 Commission (Cr) 8,000 Donation 15,000 Lighting 18,000 Sundry Expenses 4,000 Discount (Dr) 25,000 Insurance premium 10,000 Repairs 5,000 101