Advantages Of Profit And Loss Account

The main advantages of profit and loss account are as follows:

1. To Obtain Net Result

Profit and loss account gives the actual information about net profit or net loss of the business for an accounting period. So, it is very useful to know the financial condition of the firm.

2. To Know Total Expenses

Profit and loss account gives the actual information about indirect expenses.

3. Determination Of Ratio

Profit and loss account serves to determine the ratio between net profit to sales and the ratio between net profit to operating expenses. It helps to understand the operational efficiency of the firm.

5. Controlling

Profit and loss account helps in controlling indirect expenses by providing important information about these expenses.