What does a profit and loss account show?

A profit and loss account, often referred to as an income statement, provides a detailed overview of a company’s financial performance over a specific period. It outlines the revenue generated from sales and other income, along with the costs and expenses incurred during the same period. By subtracting total expenditures from total revenue, it clearly demonstrates the profit or loss made by the business in that timeframe.

This is crucial for understanding the profitability and operational efficiency of a company. It allows stakeholders—such as investors, management, and analysts—to assess how well the company is performing and identify trends in revenue and expenses. The information presented is fundamental for decision-making, budgeting, and financial planning.

In contrast, the other options refer to different financial statements. For instance, assets and liabilities are shown on a balance sheet, which provides a snapshot of a company’s financial position at a specific point in time. Cash flow status is depicted in a cash flow statement, illustrating how cash is generated and used in operating, investing, and financing activities. Projected revenue for the next year pertains to forecasting and is not captured in a profit and loss account, which records historical performance rather than future estimates.