What happens to the balance in the Profit and Loss a/c?
The "Profit & Loss a/c" is opened anew every accounting period. The "P & L a/c" relating to a particular accounting period is independent of the "Profit and Loss a/c" of any other accounting period.
Sandy
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The net profit or loss arrived at in your profit and loss statement is closed off to the Retained Earnings a/c in the balance sheet. Assume your RE a/c has an opening balance of $1m and you made a net profit of 200k this year. Your RE a/c will have a closing balance of $1.2m. This is brought forward to be next year's opening bal. to which you will add next yr's net profit and on it goes.
De
what ever the difference is it is added to owners equity... sometimes this is given to the owners as a bonus, if profit, to maintain the books at a certain level at the end of the year...
toby
profit and loss or income and expense account are being closed every year-end to surplus free or equity account. if in case there is/are entries made affecting previous year income or expense account, this should be charge correspondingly to surplus free or equity account
kidnash
It is placed on the owners equity.