In the Profit and Loss Account, which of the following is considered an expense?

₹0.0

Question: In the Profit and Loss Account, which of the following is considered an expense?

Options:

Correct Answer: Cost of Goods Sold

Solution:

Cost of Goods Sold is considered an expense in the Profit and Loss Account.

In the Profit and Loss Account, which of the following is considered an expense?

In the Profit and Loss Account, which of the following is considered an expense?

Step 1: Understand what a Profit and Loss Account is. It shows a company's revenues and expenses over a specific period.
Step 2: Identify what an expense is. An expense is a cost that a business incurs to earn revenue.
Step 3: Learn about Cost of Goods Sold (COGS). COGS is the direct cost of producing the goods sold by a company.
Step 4: Recognize that COGS is deducted from revenue to calculate gross profit.
Step 5: Conclude that since COGS is a cost incurred to generate sales, it is classified as an expense in the Profit and Loss Account.

Profit and Loss Account – A financial statement that summarizes revenues, costs, and expenses to determine net profit or loss over a specific period.
Cost of Goods Sold (COGS) – The direct costs attributable to the production of the goods sold by a company, considered an expense in the Profit and Loss Account.