Difference between Trading Account and Profit and Loss Account
Below is the difference between Trading Account and Profit and Loss Account.
Profit and Loss Account
|Trading Account is the first stage of Final Accounts. As it is prepared before preparing Profit & Loss Account.||It is the second stage of Final Accounts,
As it is prepared after preparing Trading Account.
|It shows gross profit or loss of business.||It shows net profit or loss of business.|
|If any mistake is committed to it, Profit & Loss Account will be wrong.||In case of any mistake in it, Trading Account will not be affected.|
|Direct expenses such as expenses connected with purchase and productions of goods and expenses incurred to bring the goods in salable condition are considered in it.||Indirect expenses such as expenses relating to sales and administration of business are charged to this account.|
|True results of business cannot be ascertained through it. It discloses partial results of the business.||It discloses the true and complete result of business.|
|It does not start with the balance of any account.||It starts with the balance of Trading Account.|
|Its balance is transferred to the Profit and Loss Account.||Its balance is transferred to Capital Account in case of sole proprietorship firm and to Profit & Loss Appropriation Account in cases of partnership firm and Joint Stock Company.|