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Which of the following items is an example of accumulated profit?

Answer and explanation

Correct answer: General Reserve

General Reserve is an amount accumulated by appropriating profits from previous years, so it represents accumulated profit. The debit balance of the Profit and Loss Account represents accumulated loss, while Advertisement Suspense Account and Preliminary Expenses represent unamortised or fictitious expenses. Exam tip: a reserve and a credit balance of the Profit and Loss Account indicate accumulated profit; a debit balance indicates accumulated loss.

Related tags

Accumulated ProfitGeneral ReservePartnership AccountsAdmission Of PartnerReservesReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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