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What is the purpose of profit and loss account in business?

April 26, 2017account answer Business Finance loss profit purpose

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What is the purpose of profit and loss account in business?

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The purpose is to tell whether the business is making a profit or not. An unprofitable business will consume its capital to the point where staying in business (survivability) is in jeopardy.

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The profit and loss account helps you to find whether you have generate enough profit or loss after your expenses have been met. It reveals this position for a period of time. Based on this information, you can understand where the business is heading to.