The second classification of transactional accounts is profit and loss accounts, which represents the income statement report components.
The balance of profit and loss accounts are reset to 0 each year. In the year-end transaction, the balances are rolled up in the retained earnings account.
Profit and loss accounts have two classifications that represent the nature of accounts: expense and revenue. The expense accounts represent the costs of assets that are consumed in the process of generating revenue; it is the actual or expected cash outflow. The revenue accounts represent the results from sales; it is the actual or expected cash inflow.
The following screenshot illustrates the main account type. To access this ...
