The main purpose or objectives of preparing profit and loss account can be described as follows:
1. To Know The Trading Result
Profit and loss account provides trading results by ascertaining net profit or net loss of the business.
2. To Check Profitability
Profit and loss account helps to check profitability of the company for the particular period.
Profit and loss account helps to know selling and distribution expenses and office and administrative expenses for the particular period.
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4. To Compare The Results
Profit and loss account helps to compare current year's result (net profit or loss) with the result of previous year.
5. To Control Expenses
Profit and loss account helps to control unnecessary indirect expenses which leads to higher profitability.
