Question

What is meant by Profit and Loss Account?

Hint:

Remember: Profit and Loss Account = Income minus Expenses = Net Profit or Net Loss for the year.

Answer 1

A Profit and Loss Account (also called an Income Statement) is a key financial statement that summarizes the revenues, costs, and expenses incurred during a specific accounting period — usually a financial year.
It shows how much money the business has earned (income) and how much it has spent (expenses) to arrive at the net result: profit or loss.
For a bank, the major income sources include interest on loans, fees, and investment returns, while expenses cover interest paid on deposits, employee salaries, rent, technology costs, and other operating expenses.
By comparing total income with total expenses, the Profit and Loss Account helps stakeholders assess whether the bank’s operations are financially healthy and profitable.
It also helps management make decisions on controlling expenses, increasing income, and planning for future growth.
In summary, the Profit and Loss Account is an essential tool for measuring the financial performance of any business, including banks, during a given period.