Solution 6.1

The Profit and Loss Account is normally prepared for a period of time showing the summary revenues and expenses over a period of time e.g. a month, six months or a full year. The purpose of the profit and loss account is to show the net profit or loss that was incurred by business during a period of time detailing revenues and costs for the period.

The purpose of the Balance Sheet is to show what the business owns (assets), and owes (liabilities and capital) at a point in time.