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Question

Profit and Loss Account is prepared to know __________.

A
Net profit
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B
Gross profit
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C
Both A and B
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D
None of the above
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Solution

The correct option is A Net profit
Profit and Loss Account is prepared to find out the net profit earned by the business from its operations. This includes a credit of gross profit and other income received and debit of all indirect expenses.

Profit & Loss Account
Particulars Amount Particulars Amount
To Rent By Gross Profit c/f
To Electricity By Dividend received
To Insurance
To Salary
To Interest
To Depreciation
To Employee Welfare
To Indirect exp (Others)
To Net Profit
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