Here we detail about the difference between trading account and profit and loss account.
1. Trading Account is the first part of Trading and Profit & Loss Account.
2. Trading Account is prepared to calculate gross profit of the business enterprise.
3. In the Trading Account, items related to direct expenses and direct incomes are recorded.
4. The balance of Trading Account viz. gross profit or gross loss is to be transferred to the Profit & Loss Account.
Profit and Loss Account:
1. Profit & Loss Account is the second part of the Trading and Profit & Loss Account.
2. Profit & Loss Account is prepared to calculate the net profit of the business enterprise.
3. In the Profit & Loss Account, items related to indirect expenses and indirect incomes are recorded.
4. The balance of Profit & Loss Account viz., net profit or net loss is to be transferred to the Balance Sheet by way of adjustments in the capital of the proprietor.