Horizontal form for profit and loss in financial statement

In this form, Profit & Loss A/c is divided into three parts, namely
(i) Trading A/c,
(ii) Profit & Loss A/c, and
(iii) Profit & Loss Appropriation A/c.
(i) Trading Account- On the debit side of Trading
Account, opening stock, net purchases and direct expenses are written and on the credit side net sales and closing stock are written. The balance of this account shows the gross profit or gross loss, which shall be transferred to the second part of the Profit & Loss Account.
Notes:
(1) It is not necessary to prepare Trading Account for a company separately; in the absence of clear instruction, corresponding items may also be shown on the second part of the Profit & Loss Account.
(2) Production or Manufacturing Companies may divide the Trading Account into two parts viz.,
(i) Manufacturing Account, and
(ii) Trading Account.
(ii) Profit & Loss Account- Gross Profit or Gross
Loss in the Trading Account shall be transferred to the credit or debit side of the Profit & Loss A/c respectively. Debit side of the Profit & Loss A/c shows remuneration to staff, office and selling expenses, managerial remuneration, loss on sales of fixed assets, bad debts, provision for depreciation and taxes and other revenue items. Credit side of the Profit & Loss A/c shows the income generated from various sources during the year such as dividend, interest, rent, transfer fees, etc. The balance of this account shows the net profit or net loss which shall be transferred to the third part of the Profit & Loss A/c i.e., to the Profit & Loss Appropriation Account.
(iii) Profit & Loss Appropriation Account- The net
profit or net loss shown in the Profit & Loss A/c shall be transferred to the credit/debit side of the Profit & Loss Appropriation A/c respectively. The credit side of this account also shows the unutilised part of reserves and provisions of previous years and surplus of profit and loss account of previous year. The debit side of the account shows the interim and proposed dividend, Debenture Redemption Reserve Fund, General Reserves, etc. Balance of this account is transferred to the balance sheet.
Important Points Related to Profit & Loss
Account
1.Profit & Loss Account should be attached after the balance sheet.
2.In order to compare, the Profit & Loss A/c should also contain figures of previous year.
3.Non-profit organisations prepare Income and Ex-penditure A/c in place of Profit & Loss A/c.