1. This account shows the revenue earned by
thebusiness and the expenses incurred by the
business to earn that revenue. This is prepared
usuallyfor a particular accounting period, which
could be a month, quarter, a half year or a year.
The netresult of the Profit and Loss Account will
show profit earned or loss suffered by the
business entity. 4 Accounting Measurement
Assumptions: Only when the financial
statements are prepared based on identical
measurement criteria and assumptions, it
becomes easy to interpret as it conveys same
meaning for all the users. A lot of events affect
the business, like receiving cash from
customers, making payment to suppliers, tax
payments, buying and selling on credit etc.
Therefore, to have identical understanding of
transactions, Accounting adopts the following
