profit and loss account shows
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the profit and loss account shows what net profit and loss your business has made within an accounting period after deducting all expenditure from the income. a net profit is earned if the total expenditure is less than the sales and a net loss if it is greater.
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❒ Profit and Loss Account shows the net result of a business entity, i.e., the Net Profit earned or the Net Loss incurred by the business during the financial period.
- ➬ 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.
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