Abstract
This chapter focuses on the statement of profit or loss. It looks into the differences between cash and profits of a business in line with sales and purchases. The chapter argues that double-entry bookkeeping is necessary to know whether a trial balance would turn into a statement of profit or loss. It lists assets, liabilities, capital, income, expenses, and drawings as types of accounts. A trial balance is drawn up at the end of a fiscal period as it is used to prepare the financial statements. Next, the chapter explores the difference between capital expenditure and revenue expenditure. It includes the equation for calculating gross profit and cost of sales.
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