Account 4 Marks Question

Solution is as follow:

Working Notes:
Operating Profit = Net Profit − Non Operating Income + Non Operating Expenses
= 3,30,000 − 0 + 20,000
= Rs 3,50,000
Loss by Fire is a non-operating expense, thus, added to the net profit to arrive at operating profit.

Difference between Trading Account and Profit and Loss Account.

	Basis	Trading Account	Profit and Loss Account
1.	Relation	Trading Account is a part of Profit and Loss Account.	Profit and Loss Account is the main account.
2.	Nature	Gross Profit or Gross Loss is determined from Trading Account.	Profit and Loss Account is prepared to ascertain net profit or net loss of the business.
3.	Transfer of Balance	Balance of the Trading Account is transferred to Profit and Loss Account.	Balance of the Profit and Loss Account is transferred to Capital Account of the proprietor.
4.	Items	Items shown in the Trading Account are purchases, sales, opening and closing stock, direct expenses, etc.	Items like indirect expenses related to sales, distribution, administration, finance, etc., are shown in the Profit and Loss Account.