Profit and loss account

The profit and loss account presents the income and cost, and the financial result accomplished in a certain accounting period. Along with a balance sheet, cash flow report, and notes with financial reports, it is part of the Annual Financial Report of entrepreneurs according to the Law of accounting. When compiling a profit and loss account, it is necessary to abide by the principles of continuity, i.e. the assumption of unlimited duration of a business, as well as the principles of consistency in applying accounting policies from one accounting period into another, and the principles of recording business transactions in the moment of their creation. It is stated in the Book of Regulations on the Structure and Content of Annual Financial Reports that the profit and loss account is compiled by applying a method of natural types of costs, for a certain time period, i.e. for a business year that is most often the same as a calendar year, though it can differ.

Profit and loss account reporting is a complicated procedure, which most often presents a problem for smaller companies whose accountants do not have sufficient experience. Profit and loss account reporting by an external accounting service presents a much smaller employment of monetary resources than a cost that can arise due to incorrect data display.

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