Question

What is the purpose of preparing trading and profit and loss account?

Answer 1

The preparation of the trading account is done in order to record the gross profit or loss of the concerned business organization for a particular accounting period.

The profit and loss account on the other hand helps the business to calculate the net profit or net loss incurred by the business for a particular accounting period.

This thus helps the business to compare their business performance and the necessary actions in this regard.