PROFIT & LOSS ACCOUNT

AND BALANCE SHEET -

COMPLETE FORMAT GUIDE
PART 1: PROFIT & LOSS ACCOUNT
(P&L ACCOUNT)
FORMAT: P&L Account of [Company Name] for the year
ended 31st March 202X
PROFIT & LOSS ACCOUNT For the year ended 31st March 202X

EXPENSES (Debit Side): ₹ ₹

To Opening Stock 50,000 To Purchases 2,50,000 To Purchase Returns (5,000) 2,45,000 Add: Carriage Inward 10,000
2,55,000 Less: Closing Stock (60,000) To Cost of Goods Sold 1,95,000

To Gross Profit c/d 3,05,000 __________ 5,00,000

SECTION A: COST OF GOODS SOLD

What comes here:

Opening Stock
Purchases (minus Purchase Returns)
Carriage Inward / Freight Inward
Direct Labour (if manufacturing)
Less: Closing Stock

SECTION B: OPERATING EXPENSES

OPERATING EXPENSES ₹ ₹

To Salaries & Wages 1,50,000 To Rent & Rates 30,000 To Insurance Premium 15,000 To Postage & Telephone 8,000 To
Stationery Expenses 5,000 To Repairs & Maintenance 12,000 To Depreciation on:

Plant & Machinery (10% on 5,00,000) 50,000

 Building (5% on 10,00,000) 50,000 To Bad Debts Written Off 2,000 To Provision for Bad Debts (5% on 50,000)
2,500 To Office Supplies 3,000 To Utilities (Electricity, Water) 8,500 3,36,000

To Operating Profit c/d 1,69,000 __________ 5,05,000

What comes here:

Salaries & Wages

Rent, Rates & Taxes
Insurance Premium
Postage, Telephone, Internet
Stationery & Office Supplies
Repairs & Maintenance
Depreciation (Plant, Building, Furniture)
Bad Debts Written Off
Provision for Bad Debts
Utilities (Electricity, Water, Gas)
Commission Paid
Advertisement
Travelling Expenses
Professional Fees

SECTION C: OTHER EXPENSES

OTHER EXPENSES ₹ ₹

To Interest on Bank Loan 20,000 To Finance Charges 5,000 To Donation 3,000 28,000

To Net Profit c/d 1,41,000 __________ 5,33,000

What comes here:

Interest on Loans/Bank Overdraft

Finance Charges
Loss on Sale of Asset
Donation
Charity
Penalty & Fine
Stock Shortage Loss

SECOND PAGE - PROFIT & LOSS ACCOUNT (CREDIT

SIDE)
PROFIT & LOSS ACCOUNT For the year ended 31st March 202X
 REVENUE (Credit Side): ₹ ₹

By Sales 3,50,000 Less: Sales Returns (5,000) By Net Sales 3,45,000

By Gross Profit b/d 3,05,000 __________ 6,50,000

By Operating Profit b/d 1,69,000

OTHER INCOME:

By Rent Received 10,000 By Commission Received 8,000 By Interest on Bank Deposit 5,000 By Discount Received
3,000 By Royalty Received 2,000 28,000

By Profit Before Tax 1,97,000

Less: Income Tax (20,000) By Net Profit (After Tax) 1,77,000 __________ 6,50,000

SECTION A: SALES REVENUE

What comes here:

Sales / Revenue from Operations

Less: Sales Returns / Trade Discounts
Service Revenue (if applicable)

SECTION B: OTHER INCOME

What comes here:

Rent Received
Commission Received
Interest on Bank Deposits
Discount Received
Royalty Received
Gain on Sale of Asset
Profit on Exchange
Dividend Received
Income from Investments

PART 2: BALANCE SHEET

FORMAT: Balance Sheet as on 31st March 202X
BALANCE SHEET As on 31st March 202X

EQUITY & LIABILITIES: ₹ ₹

 Capital Account: Opening Capital 5,00,000 Add: Profit for the year 1,77,000 6,77,000 Less: Drawings (50,000) By
Capital (Closing) 6,27,000

CURRENT LIABILITIES:

By Trade Payables (Creditors) 1,50,000 By Bank Overdraft 50,000 By Loan Payable 75,000 By Salary Payable 10,000
By Income Tax Payable 20,000 By Rent Payable 5,000 By Interest Payable 3,000 3,13,000

TOTAL EQUITY & LIABILITIES 9,40,000 __________

SECTION A: CAPITAL & RESERVES

What comes here:

Opening Capital
Add: Profit for the year
Less: Drawings / Withdrawals
Add: Additional Capital Introduced
Less: Capital Withdrawn

SECTION B: CURRENT LIABILITIES

What comes here:

Trade Payables (Creditors/Accounts Payable)

Bank Overdraft / Bank Loans (Short-term)
Unsecured Loans (Payable within 1 year)
Salary Payable / Wages Payable
Income Tax Payable
Electricity Bill Payable
Rent Payable
Commission Payable
Interest Payable
Dividend Payable

SECTION C: NON-CURRENT LIABILITIES (if any)

What comes here:

Long-term Bank Loans

Debentures
Long-term Borrowings

BALANCE SHEET (ASSETS SIDE)

ASSETS:
 NON-CURRENT ASSETS (Fixed Assets):

Property, Plant & Equipment: Building 10,00,000 Less: Depreciation (50,000) 9,50,000

Plant & Machinery 5,00,000 Less: Depreciation (50,000) 4,50,000

Furniture & Fixtures 50,000 Less: Depreciation (5,000) 45,000 14,45,000

Intangible Assets: Goodwill 50,000

Investments (Long-term): Investment in Bonds 1,00,000

TOTAL NON-CURRENT ASSETS 15,95,000

CURRENT ASSETS:

Inventory / Stock 60,000 Trade Receivables (Debtors) 50,000 Less: Provision for Bad Debts (2,500) 47,500

Bank & Cash Balances: Cash on Hand 10,000 Bank Balance (Savings) 50,000 Bank Balance (Current) 30,000 90,000

Prepaid Expenses: Insurance Prepaid 3,000 Rent Prepaid 2,000 5,000

Short-term Investments 15,000

Advances & Deposits: Advance to Suppliers 5,000 Deposit with Suppliers 2,000 7,000

TOTAL CURRENT ASSETS 2,24,500

TOTAL ASSETS 18,19,500 __________

SECTION A: NON-CURRENT / FIXED ASSETS

What comes here:

Land & Building (with depreciation)

Plant & Machinery (with depreciation)
Furniture & Fixtures (with depreciation)
Vehicles (with depreciation)
Goodwill
Patents & Trademarks
Long-term Investments

Format Rule: Always show:

Asset Name
Less: Accumulated Depreciation
= Net Book Value

SECTION B: CURRENT ASSETS

 What comes here:

Inventory / Stock
Trade Receivables / Debtors
Less: Provision for Bad Debts
Cash on Hand
Bank Balance (Savings, Current, etc.)
Prepaid Expenses
Short-term Investments
Advances to Suppliers
Interest Receivable
GST Input Credit (if applicable)

IMPORTANT ACCOUNTING RULES

Rule 1: MATCHING PRINCIPLE
Expense incurred in a year should be recorded in that year
Revenue earned in a year should be recorded in that year
Adjustments help achieve this

Rule 2: DEBIT/CREDIT SIDE BALANCE

P&L Account: Both sides must total equally
Balance Sheet: Assets side = Equity + Liabilities side
If not matching, check for errors

Rule 3: DEPRECIATION PLACEMENT

Depreciation on Assets = In P&L Account (Expense side)
Accumulated Depreciation = In Balance Sheet (deducted from Asset value)

Rule 4: CLOSING STOCK

In P&L Account: Shown as credit side adjustment (reduces COGS)
In Balance Sheet: Shown as current asset under inventory

Rule 5: DRAWINGS/DISTRIBUTIONS
Shown in Balance Sheet ONLY (reduces capital)
NOT shown in P&L Account
 EXAMPLE: COMPLETE JOURNAL
ENTRY TO CLOSING ENTRIES
Adjustment Journal Entries (Sample):
1. Depreciation on Plant & Machinery 10% Dr. Depreciation Expense 50,000 Cr. Accumulated Depreciation 50,000

2. Bad Debts Written Off (specific) Dr. Bad Debts Expense 2,000 Cr. Trade Receivables 2,000

3. Provision for Bad Debts (5% on Debtors) Dr. Provision Expense 2,500 Cr. Provision for Bad Debts 2,500

4. Closing Stock Dr. Stock / Inventory 60,000 Cr. Cost of Goods Sold 60,000

5. Interest Accrued (not yet paid) Dr. Interest Expense 5,000 Cr. Interest Payable 5,000

6. Rent Received (not yet collected) Dr. Rent Receivable 3,000 Cr. Rent Received 3,000

SUMMARY TABLE: WHERE ITEMS GO

P&L P&L Balance Sheet Balance Sheet
Item
(Debit) (Credit) Asset Liability
Sales - ✓ - -
Purchases ✓ - - -
Salary ✓ - - - (if payable)
Rent ✓ - - - (if payable)
Depreciation ✓ - - -
Opening Stock ✓ - - -
Closing Stock - ✓ ✓ (Asset) -
Drawings - - - - (reduces capital)
Capital - - - ✓
Creditors - - - ✓
Debtors - - ✓ -
Bank Loan - - - ✓
Cash - - ✓ -
Interest Payable - - - ✓
Interest Received - ✓ - -
Bad Debts ✓ - - -
Provision for Bad
✓ - - - (or reduce debtors)
Debts
 FINAL CHECKLIST BEFORE
SUBMITTING
✓ P&L Account has proper Cost of Goods Sold calculation ✓ All expenses are categorized correctly ✓ Other Income
section includes non-operating revenue ✓ Balance Sheet shows Assets = Liabilities + Capital ✓ Depreciation shown in
both P&L and Balance Sheet ✓ Closing Stock shown in both P&L (credit) and Balance Sheet (asset) ✓ Drawings shown
in capital account (Balance Sheet) only ✓ All accruals and prepaid items properly adjusted ✓ Both sides of each
statement balance perfectly

Document prepared for: [Link] / PGDM Students Reference: Standard Indian Accounting Practices Last
Updated: December 2025