Informal Letter Writing

This is a note for SLC students on how to write an informal letter. Informal letters is also known as personal letter. It refers to letter of friends and relatives. They are usually full of news of written in the form of chatty or conversational style. We can touch on many subjects in this letter

Summary

Things to Remember

Types Of Letter

Formal letter
personal letters
Informal letter:
Business letters
Official letters (Application letters, letters to newspaper etc.)
Social letters (notes of invitations, their replies, condolences, congratulations, etc)

Parts of personal letters:

Sender's address
Date
Salutation
Body of the letter
Validation
Signature

MCQs

No MCQs found.

Subjective Questions

Q1:

What is profit and loss account?

Type: Short Difficulty: Easy

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Q2:

Define profit and loss account. What are the objectives of preparing profit and loss account?

Type: Long Difficulty: Easy

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Answer: Profit and loss account is the second step of final accounts. It is prepared to ascertain the net profit or the net loss of the business during the accounting period. It is prepared after the preparation of trading account. It is prepared by transferring gross profit or gross loss from the trading account. Hence, profit and loss account is a financial statement, which helps to know the operating result of the business. It is prepared in the form of ledger. According to S. Mukharjee,“Profit and loss account is a statement which summarizes all indirect revenue expenses in one side which is compared with gross profit/ revenue incomes in another side and net trading income of an accounting period is assessed.” From the above definition, it is clear that profit and loss account is a financial statement, which helps to know the operating result of the business. It is prepared in the form of ledger. The profit and loss account is prepared for the determination of net profit or net loss for the specific period of time. The following are the main objectives of profit and loss account: <ol><li>To know the amount of net profit or net loss: Profit and loss account is prepared to find out the amount of net profit or net loss made by the business during the particular period of time. It is determined by making comparison between indirect expenses and indirect incomes. It enables the businessman to make comparison of net profit or net loss of the current year with the previous year. </li> <li>To provide information about office and administrative expenses: All the expenses, which are incurred in the process of operating the business, are known as office and administrative expenses. It includes the expenses like office salaries, printing and stationary expenses, legal expenses, telephone and electricity charges, office rent, audit fees, insurance premium etc. percentage of such expenses on sales can be determined and compared with previous year, which helps to control such expenses. </li> <li>To provide information about selling and distributing expenses: Expenses, which are incurred in the process of selling and distributing the goods, are known as selling and distributing expenses. It includes the expenses like warehouse expenses, carriage on sales, packing expenses, commission on sales, advertising, traveling expenses etc. Percentage of such expenses on sales can be determined and compared with previous year, which helps to control such expenses. </li> <li>To provide information about other expenses and losses: There may be different types of expenses other than office and administrative, selling and distributing and financial expenses. The information of such expenses is also provided by profit and loss account. Depreciation, repairs and maintenance, bad debts, provision for bad debts, loss on sale of fixed assets and loss of goods in transit are some of the examples of other expenses and losses. These expenses can be compared with the expenses of the previous year and remedial action can be taken for minimizing such expenses and losses. </li> <li>To provide information about financial expenses: The expenses, which are incurred for fulfilling the financial need of the business, are known as financial expenses. These expenses include interest on loan, interest on bank overdraft, bank charges etc. Percentage of such expenses on net profit can be determined and compared with previous year, which provides pertinent information for raising loan. </li> <li>To provide information about incomes and profits: Different types of incomes and profits are earned by the business in the process of operation of the business. Rent received, interest received, commission received, discount received, and profit on sale of fixed assets and bad debts recovered are some of the examples of such incomes and profits. The information of such incomes and profits is provided by profit and loss account. </li> <li>To make comparison: Profit and loss account helps to compare the amount of sales and net profit of current year with those of previous years. Such comparison helps in evaluating the progress of the business. </li> <li>To measure efficiency: Profit and loss account helps in measuring operating efficiency of the business. Such efficiency is measured by comparing the amount of net profit with the amount of operating expenses.</li> </ol>

Q3:

What are the importance and advantages of profit and loss account?

Type: Short Difficulty: Easy

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Q4:

State any two objectives of preparing profit and loss account.