Question

Give three differences between Trading Account and Profit and Loss Account.

Answer 1

Trading Account
1 It is the first stage of final accounts.
2 It shows the gross result (gross profit or gross loss) of the business.
3 All direct expenses (expenses connected with purchase or production of goods) are considered in it.

Profit and Loss Account

1 It is the second stage of the final accounts.
2 It shows the net results (net profit or net loss) of the business.
3 All expenses connected with sales and administration (indirect expenses) of business are considered.

Answer 2

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.