Describe briefly the need of Profit and Loss Account.

Need of Profit and Loss Account

• To Ascertain Net profit or Net Loss: The Profit and Loss Account provides information about the net profit or net loss earned or suffered by the business during the accounting period.
• Comparison with the Previous Year’s Profit: The profit amount ascertained by the Profit and Loss Account for the acounting period can be compared with that of the previous year’s profit. It helps in ascertaining whether the business id being conducted efficiently or not.
• Control Over Expenses: an analysis of the various expenses included in the Profit and Loss Account and their comparison with the expenses of the previous period helps in taking steps for effective control over the expenses.