Here we detail about the difference between trading account and profit and loss account.
Trading 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.
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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.
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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.