Charges against/on Profits

A debit in a nominal account for ascertaining profits like the Trading and Profit and Loss account which represents a transfer of debit balance from some other nominal account (representing an expenditure or loss) to that account is said to be a charge on/against profits.

Example

Transfer of Salaries to Profit and Loss account i.e. closing the Salaries 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
—	—	Profit and Loss a/c To Salaries a/c	Dr.	- -	4,50,000	4,50,000
		[For closing the salaries 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 expenditure i.e. debit balance from the salaries account to the profit and loss account will result in the the Profit and Loss account being debited and the salaries account being credited.

The charge on/against profits would reduce the available profits or increase the existing losses.

When there is no charge on account of Salaries

Dr Profit and Loss a/c Cr
Particulars	Amount	Particulars	Amount
To Rent To Interest To Taxes To Depreciation To General Reserve To Net Profit	2,50,000 12,40,000 14,00,000 2,10,000 50,000 22,50,000	By Gross Profit	54,00,000
	54,00,000		54,00,000

When there is no charge on account of Salaries

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

But for the charge on account of salaries, the net profit would have been Rs. 22,50,000.