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This is the account constructed by a business organization to show the net profit or net loss. It shows on the debit side the expenses incurred by an organization and on the credit side the gross profit from trading and other income or gains. The profit or loss is carried to the capital account. The main purpose of preparing a profit and loss account is to arrive at the net profit or loss after charging all the expenses from the gross profit. It is the Continuation of the Trading account.

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