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Profit and Loss Account

Profit and Loss Account is prepared to find out the net profit or net loss of the business. All the indirect incomes and expenditure are transferred to the Profit and Loss Account on the credit side and debit side respectively. After transferring all details to the Profit and Loss Account, we balance this account. If the balance is in debit side it is called Net profit. Suppose;· the balance is in the credit side it is called as Net Loss. Net profit is transferred to the balance sheet Liabilities side and added to the capital. If it is Net Loss it will be deducted from the capital.