What is the purpose of a Profit or Loss Statement?

The purpose of a Profit or Loss Statement, also known as an Income Statement, is to summarize financial results over a defined timeframe. This financial report details a company's revenues, expenses, and profits or losses, providing insight into its operational performance during a specific period, such as a month, a quarter, or a year.

This summary allows stakeholders—including management, investors, and creditors—to assess the company’s profitability and financial health. By reviewing the statement, they can understand how much money the company made versus how much it spent in that timeframe. It serves as a crucial tool for decision-making, budget planning, and identifying trends in financial performance.

The other choices mention tasks that are not directly related to the primary goal of a Profit or Loss Statement. For instance, recording employee hours worked pertains to timekeeping and payroll rather than financial performance. Similarly, providing legal documents for policies and managing client relationships focus on compliance and customer interactions, respectively, which fall outside the scope of summarizing financial outcomes.