Question

Give four points of difference between trading and profit and loss account.

Answer 1

The differences between trading account and profit and loss account

$\begin{array}{ccc}\text{Basis}& \text{Trading Account}& \text{Profit and Loss Account}\\ \text{Relation}& \text{Trading account part of profit and loss account.}& \text{Profit and loss account is the main account.}\\ \text{Purpose}& \text{The gross profit or gross loss is ascertained}& \text{The profit and loss account is prepared to}\\ & \text{from the trading account.}& \text{ascertain the net profit or net loss of the business.}\\ \text{Transfer of Balance}& \text{The balance of the trading account is}& \text{The balance of the profit and loss account is}\\ & \text{transferred to the profit and loss account.}& \text{transferred to the capital account of the proprietor.}\\ \text{Items}& \text{Items shown in the trading account are}& \text{Items like indirect expenses related to sales,}\\ & \text{purchases, sales, stock, direct expenses. etc.}& \text{distribution. administration. finance, etc., are}\\ & & \text{shown in the profit and loss account.}\end{array}$