JKSSB Written 2022
Answer & Explanation
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Correct Answer:
Option D —
net loss
In the Profit & Loss (P&L) Account, the debit side is the "expense and loss" side, while the credit side is the "income and gain" side. If the total of the debit side is greater than the total of the credit side, it means your expenses have exceeded your income, resulting in a Net Loss.How it works:
Debit Side: Records all indirect expenses (rent, salaries, electricity, depreciation, etc.).
Credit Side: Records Gross Profit (transferred from the Trading Account) and other indirect incomes (interest received, rent received, etc.).
The Result: To balance the account, the difference is added to the "lighter" side. If the debit side is heavier, the balancing figure is written on the credit side as "By Net Loss" and then transferred to the Capital Account (reducing the owner's equity).
Why the other options don't fit:
A) Gross profit: This is found in the Trading Account, not the P&L account. It occurs when Sales exceed the Cost of Goods Sold.
B) Net profit: This occurs when the Credit side (income) of the P&L account is greater than the Debit side (expenses).
C) Gross loss: Like Gross Profit, this is a result of the Trading Account, occurring when the cost of production is higher than the sales revenue.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.