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

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

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.

Updated on: 2020-07-24T06:54:06+05:30

360 Views

Kickstart Your Career

Get certified by completing the course

Get Started
Advertisements