Question
How does Profit and Loss Account differ from Trading Account?
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Answer
Difference between Trading Account and Profit and Loss Account-
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Basis
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Trading Account
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Profit and Loss Account
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1.
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Relation
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Trading Account is a part of Profit and Loss Account
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Profit and Loss Account is prepared to ascartain net profit or net the business.
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2.
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Nature
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Gross Profit or Gross Loss is determined from Trading Account.
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Profit and Loss Account is prepared to ascertain net profit or net loss of the business.
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3.
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Transfer of Balace
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Balance of the Trading Account is Transferred to profit and Loss Account
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Balance of the Profit and Loss Account is transfered to Capital Account of the proprietor.
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4.
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Items
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Items shown in the Trading Account are purchases, sales, opening and closing stock direct expencses etc.
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Items like indirect related to sales, distribution, administration, finance etc, are shown in the profit Loss Account.
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