What are the importance of Profit and Loss Account?

The importance of Profit and Loss account lies in the fact that it provides accounting date which can be used for some managerial decisions as given below

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Net Result:

It provides information about net profit  or net loss earned or incurred by the business during a particular period.


Accounting data for determining efficiency:

Net results provided by the Profit and Loss Account can be compared with the net results of the previous years and the efficiency of the business can be determined by such inter-period comparison of results.

Control over expenses:

Profit and Loss Account provides information about various kinds of expenses. The expenses of the current year can be compared with the expenses of the previous year and effective steps can be taken for the control of expenses, where it becomes necessary.


Future Profit Planning:

Net profit of various years can be taken as basis for future profit-planning. It helps the business in the allocation of sources and future expansion.

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