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Difference Between Trading Account and Profit and Loss Account:

Learning Objectives:

  1. Differentiate between trading account and profit and loss account.


Following are the main points of difference between trading account and profit and loss account:

 

Trading Account

 

Profit and Loss Account

1 It is the first stage of final accounts. 1 It is the second stage of the final accounts.
2 It shows the gross result (gross profit or gross loss) of the business. 2 It shows the net results (net profit or net loss) of the business.
3 All direct expenses (expenses connected with purchase or production of goods) are considered in it. 3 All expenses connected with sales and administration (indirect expenses) of business are considered.
4 It does not start with the balance of any account. 4 It always starts with the balance of a trading account (gross profit or gross loss).
5 Its balance (G.P or G.L) is transferred to profit and loss account. 5 Its balance (N.P or N.L) is transferred to capital account in balance sheet.
Definition and Explanation of Final Accounts
Trial Balance - A Starting Point for Final Accounts
Meanings and Sources of Revenue
Direct and Indirect Expenses
Matching Revenue and Expenses
Trading Account
Profit and Loss Account
Difference between Trading Account and Profit and Loss Account
Difference between Gross Profit and Net Profit
Balance Sheet
Difference between Trial Balance and Balance Sheet
Example of Trading and Profit and Loss Account and Balance Sheet

 

 

A D V E R T I S E M E N T

 

Financial Accounting Topics


  Introduction to Accounting
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  Transactions and Accounting Equation
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  Analysis of Business Transactions
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  Journal, Ledger and Trial Balance
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  Accounting for Bills of Exchange
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  Special Journals
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  Cash Book
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Bank Reconciliation Statement
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  Final Accounts
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  Work Sheet
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  Capital and Revenue Items
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  Valuation of Inventories
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  Accounts of Non-profit Making Organizations
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  Statement of Cash Flows
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  Accounting Ratios Analysis
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  Depreciation, Provisions and Reserves
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  Accounting Dictionary
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  Financial Calculators
 
 
 
Managerial Accounting Topics

  Financial Statements
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  Cost Volume Profit Relationship
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  Variable Costing System
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  Materials and Inventory Cost Control
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  Activity Based Costing System
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  Standard Costing and Variance Analysis
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  Balanced Scorecard
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  Capital Investment Analysis/Capital Budgeting
 

 

 

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