Accruals to Profits

A credit in a nominal account for ascertaining profits like the Trading and Profit and Loss account which represents a transfer of credit balance from some other nominal account (representing an income or gain) to that account is said to be an accrual of profit.

Example

Transfer of Commission Received to Profit and Loss account i.e. closing the Commission Received account by transfer to the profit and loss account at the end of the accounting period.

Journal in the books of ___ for the period from ___ to ___
Date	R/V No.	Particulars		L/F	Amount
					Debit	Credit
—	—	Commission Received a/c To Profit and Loss a/c	Dr.	- -	14,000	14,000
		[For closing the commission received account at the end of the accounting period by transfer to the profit and loss account.]

Ledger Show

Profit and Loss account will have a credit balance when there are profits. Transfer of income i.e. a credit balance from the commission received account to the profit and loss account will result in the Commission Received account being debited and the Profit and Loss account being credited.

The accrual to profits would increase the available profits or reduce the existing losses.

When there is no accrual of profit on account of Commission Received

Dr Profit and Loss a/c Cr
Particulars	Amount	Particulars	Amount
To Rent To Salaries To Interest To Taxes To Depreciation To General Reserve To Net Profit	2,50,000 4,50,000 12,40,000 14,00,000 2,10,000 50,000 18,00,000	By Gross Profit	54,00,000
	54,00,000		54,00,000

When there is accrual of profit on account of Commission Received

Dr Profit and Loss a/c Cr
Particulars	Amount	Particulars	Amount
To Rent To Salaries To Interest To Taxes To Depreciation To General Reserve To Net Profit	2,50,000 4,50,000 12,40,000 14,00,000 2,10,000 50,000 18,14,000	By Gross Profit By Commission Received	54,00,000 14,000
	54,14,000		54,14,000

But for the accrual on account of commission received, the net profit would have been Rs. 18,00,000.