Question
Explain the difference between Trading Account and Profit and Loss Account.
| No. | Trading Account | Profit & Loss Account |
| $1$ | The account prepared for calculating profit & loss by recording the transaction of receipts and issues of goods and expenses of production is called Trading Account. | The account prepared for calculating net profit or net loss by deducting other expenses and adding other incomes in the gross profit is called profit and loss account. |
| $2$ | Trading account is prepared to know gross profit or gross loss of the business. | Profit and loss account is prepared to know net profit or net loss of the business. |
| $3$ | The balance of trading A/c is transferred to profit and loss account. | The balance of profit and loss account is transferred to capital account in the Balance Sheet. |
| $4$ | It is not compulsory to prepare trading account. | It is compulsory to prepare profit and loss account for all the business unit. |
| $5$ | Credit balance of trading account is called Gross profit and Debit balance of trading account is called Gross loss. | Credit balance of profit & loss account is called net profit and debit balance of profit & loss account is called net loss. |
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