why we call "Profit & Loss Account" ; why don't we call it as "Profit Or Loss Account"

Question

The Profit & Loss account will show you only one result either Profit or Loss at the end of the accounting period. But we will call it as "PROFIT & LOSS A/c" . Why don't we call it as "Profit Or Loss A/c" as it only shows profit or loss .

Answer 1

Great question! This is the question that I'd like to ask any accounting lecturer today.

blackrats above has a reasonable argument for justifying the use of the label. My interpretation of blackrats' argument is the label can be justified because we use the same account for all the profit AND loss that we've accumulated throughtout the years that a business has been in operation. However, revenue, expense and profit and loss acount are always cleared at the end of the period. So tecnically a profit and loss account cannot show all the profit and loss that you have accumulated throughout the different periods.

What I cannot stand more is the "Profit and Loss Statement". I may not remember correctly whether a profit and loss account is cleared at the end of the period, but I know for sure that you don't roll over/continue your Profit and Loss Statement to the next period. It clearly says under every Profit and Loss Statement title the period in which the Statement applies. Then, it is clearly illogical to have both profit and loss for the same period. If I were to modify the standards, I would require entities to put the title Profit Statement when they've got profit and Loss Statement when they've incurred a loss. This would save investors' time in looking at the bottom of a Statement to determine whether an entity has a profit or a loss.

I think the profit and loss statement has been changed to Income Statement under the IASB, anyway.

Answer 2

One year it can show a profit, the next year a loss, but we still use the same account

Answer 3

Good question ! now you get to talk about multiple factors.
each item can contribute profit or loss
all put together is what we call profit and loss account in general.

if you are concerned with only one line item you can call so.
since the formula is applicable to more than a few.. its called profit and loss account. got it.

Answer 4

good question - glad to see today's accounting students/professionals are thinking outside the box.

it is called "profit & loss" because the company can have a profit this month, a loss next month and so on. this way regardless of the bottom line, the title will be the same.

Answer 5

In a business, each and every transaction ,either brings profit or brings loss to the firm.Altogether , it comes in Profit and Loss account.One transaction may brings profit to the firm.another transaction may bring loss to the firm.So commonly we term it as PROFIT AND LOSS ACCOUNT.
Sunil Kumar Pattuvakkaran: [e-mail]

Answer 6

thats a good thing you asked i will start saying it profit or loss account from today onwards hope others will follow

Answer 7

you could call it income or Loss. in spite of the undeniable fact that, the assertion could be reporting a income yet incorporate losses. as an occasion it could checklist a loss on sale of equipment, however the internet earnings could be a income. the final identify is "earnings assertion."

Answer 8

bcz,profit and loss account debit all expenses and losses and credit all incomes and gains...that is why we called profit and loss account..