How is profit/loss determined for a financial period?

Question: How is profit/loss determined for a financial period?

One of the most important indicators of a business's performance is its profit or loss for a given period. Profit or loss is the difference between the revenue and the expenses of a business. Revenue is the income generated from selling goods or services to customers. Expenses are the costs incurred in running the business, such as salaries, rent, utilities, taxes, etc.

To determine the profit or loss for a financial period, such as a month, a quarter, or a year, we need to follow these steps:

1. Calculate the total revenue for the period by adding up all the sales receipts or invoices.

2. Calculate the total expenses for the period by adding up all the bills or payments.

3. Subtract the total expenses from the total revenue to get the profit or loss for the period.

If the result is positive, it means that the business has made a profit for the period. If the result is negative, it means that the business has incurred a loss for the period.

Profit or loss is an important measure of how well a business is doing and how sustainable it is in the long run. A business that consistently makes a profit can grow and invest in its future. A business that consistently incurs a loss may face financial difficulties and risk going out of business.

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