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Profit and loss accounts
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 form, navigate to General ledger | Chart of accounts | Accounts | Main accounts. Click on Main account, then click on Edit, and then on the General fast tab:
