Question

Mention any three importance of profit and loss A/c. ​

Answer 1

Answer:

sorry but I don't know

Explanation:

sorry

Answer 2

ANSWER

✰ Three importance of Profit and Loss Account are as follows :-

• [1] To ascertain the Net Profit or Net Loss : Profit and Loss Account is prepared with the objective to ascertain the Net Profit or Net Loss of a business enterprise. Gross Profit or Gross Loss is ascertained with the help of preparing Trading Account and after that the Net Profit or Net Loss is ascertained with the help of preparing Profit and Loss Account.

• [2] To help in the preparation of Balance Sheet : A Balance Sheet can be prepared only after ascertaining the Net Profit or Net Loss through the preparation of Profit and Loss Account. The Balance Sheet shows the financial position of the business enterprise at the end of an accounting period. To prepare the Balance Sheet, Net Profit or Net Loss of the business during the accounting period is is need to ascertain with the help of preparing Profit and Loss Account.

• [3] To exercise Control over Expenses : Profit and Loss Account helps in comparison of various expenses with those of the previous years. The percentage of each individual expenses to the net profit may be calculated and compared with those of the previous years. Such comparison helps in taking concrete steps for controlling the unnecessary expenses.

MORE TO KNOW :

✰ Profit and Loss Account :-

• ➻ Profit and Loss Account is a part of the Income Statement as well as the Final Accounts through which the net result of working of the business can be ascertained.

• ➻ According to R. N. Carter, "A Profit and Loss Account is an account into which all gains and losses are collected, in order to ascertain the excess of gains over the losses or vice versa".

• ➻ The net result, i.e., Net Profit or Net Loss of a business during an accounting period is ascertained with the help of preparating of Profit and Loss Account.

• ➻ A Profit and Loss Account starts with the amount of Gross Profit or Gross Loss brought down from the Trading Account.

• ➻ The balance amount of Profit and Loss Account which is either Net Profit or Net Loss, is transferred to the Capital Account in the Balance Sheet.