Question

Prepare the format of Profit and loss account of sole proprietorship. (With minimum 4 items)

Answer 1

Answer:

Every company prepares a Profit and Loss Account/statement at the end of the year generally, to get the visibility of the income, earning, expenses and loss incurred in a specific range of period. It is important to prepare Profit and Loss statement because this information helps an organisation to take the right business decision like where should we do the cost-cutting, from where can a business generate more profit and in which part business is suffering the loss. In this article, we will see types of Profit and Loss account and Profit and Loss account format.

Profit and Loss Account/Statement

Types of Profit and Loss

Gross profit/ Gross loss

Net profit/ Net loss

We prepare Trading account to ascertain the Gross profit/ Gross loss. While we prepare Profit and loss account to ascertain the Net profit/ Net loss.