what is difference in the profit and loss account and profit and loss suspense account ?
Hi Tanu,
Profit and Loss Suspense A/c is maintained when profit, before ascertainment of profit, is to be paid. Therefore, to give the profit/loss on a random basis or temporarily, Profit and Loss Suspense A/c is prepared. It is a fictitious asset of the company.
It is not necessary that a partner may die at year end. Therefore, whenever he/she dies, his executor becomes entitled for the deceased partner’s share in the firm. To provide for share due in profit/loss to the executor (from the date of last Balance Sheet’s Profit till the date of death of partner), the share of profit is calculated and transferred to the Executor’s Account through Profit and Loss Suspense A/c
Profit and Loss Suspense A/c is maintained when profit, before ascertainment of profit, is to be paid. Therefore, to give the profit/loss on a random basis or temporarily, Profit and Loss Suspense A/c is prepared. It is a fictitious asset of the company.
It is not necessary that a partner may die at year end. Therefore, whenever he/she dies, his executor becomes entitled for the deceased partner’s share in the firm. To provide for share due in profit/loss to the executor (from the date of last Balance Sheet’s Profit till the date of death of partner), the share of profit is calculated and transferred to the Executor’s Account through Profit and Loss Suspense A/c
It is the reduction from Net Profit of the year. Therefore, it is shown on the Asset Side of the Reconstituted Firm’s Balance Sheet.
On the other hand, Profit and Loss A/c (as learnt in Grade-XI) is prepared at the year end to determine the net profit/loss earned/suffered during the financial year.
Hope this clarifies your doubt.
On the other hand, Profit and Loss A/c (as learnt in Grade-XI) is prepared at the year end to determine the net profit/loss earned/suffered during the financial year.
Hope this clarifies your doubt.