Importance Profit and Loss Account 

The Profit and Loss Account Provides information regarding the following matters:

1.  It provides information about the net profit or net loss earned or suffered by the business during a particular period. Thus, it is an index of the profitability or otherwise of the business.

(ii) The Profit figure disclosed by the Profit and Loss Account for a particular period can be compared with that of the other period. Thus, it helps in ascertaining whether the business is being run efficiently or riot.

(iii) An analysis of the various expenses included in the Profit and Loss Account ant their comparison with the expenses of the previous period or periods helps in taking steps for effective control of the various expenses.

(iv) Allocation of profit among the different periods or setting aside a part of the profit for future contingencies can be done. Moreover, on the basis of profit figures .