What is difference between profit and loss account and trading account?

Banking & FinanceManagementCompanies/Organisations

The major differences between profit and loss account and trading are as follows −

Profit and loss account

  • Represents profit earned or loss sustained.

  • It ascertains net profit for a period.

  • The balance is transferred to the capital account.

  • Operating and non-operating incomes and expenses.

  • It is prepared after trading account.

  • The second step in preparing final account.

  • It is dependent on trading account.

  • It is treated directly in the balance sheet.

  • It discloses true and complete results of a business.

Trading account

  • Represent trading activities.

  • Ascertain gross profit for a period.

  • Balance is transferred to profit and loss account.

  • Direct revenue and direct revenue.

  • Prepared before the profit and loss account.

  • Primary step in preparing final account.

  • Not dependent on trial balance.

  • Not treated directly in the balance sheet.

  • Discloses partial results of the business.

raja
Published on 24-Jul-2020 06:54:06
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