Question

differce between trading account and profit&loss account

Answer 1

Trading account just shows direct expenses and direct revenues. we can call those expenses together as Cost of goods sold. and direct revenue is only Sales. Trading account won't consider indirect expenses such as HO expenses, Sales & distribution expenses etc. and it won't consider indirect income such as interest on investments, dividend on shares purchased in other companies etc.. so, Trading account shows only Gross profit without considering any indirect items and p&l account shows Net profit after considering indirect items.

Hope it clears your doubt. feel free to ask doubts if u have any.

Regards,
Suresh Katla