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Difference Between Trading Account and Profit and Loss Account:

Learning Objectives:

  1. Differentiate between trading account and profit and loss account.

Following are the main points of difference between trading account and profit and loss account:

 

Trading Account

  

Profit and Loss Account
1 It is the first stage of final accounts. 1 It is the second stage of the final accounts.
2 It shows the gross result (gross profit or gross loss) of the business. 2 It shows the net results (net profit or net loss) of the business.
3 All direct expenses (expenses connected with purchase or production of goods) are considered in it. 3 All expenses connected with sales and administration (indirect expenses) of business are considered.
4 It does not start with the balance of any account. 4 It always starts with the balance of a trading account (gross profit or gross loss).
5 Its balance (G.P or G.L) is transferred to profit and loss account. 5 Its balance (N.P or N.L) is transferred to capital account in balance sheet.
» Definition and Explanation of Final Accounts
» Trial Balance - A Starting Point for Final Accounts
» Meanings and Sources of Revenue
» Direct and Indirect Expenses
» Matching Revenue and Expenses
» Trading Account
» Profit and Loss Account
» Difference between Trading Account and Profit and Loss Account
» Difference between Gross Profit and Net Profit
» Balance Sheet
» Difference between Trial Balance and Balance Sheet
» Example of Trading and Profit and Loss Account and Balance Sheet

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Financial Accounting Topics
  Introduction to Accounting
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  Transactions and Accounting Equation
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  Analysis of Business Transactions
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  Journal, Ledger and Trial Balance
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  Accounting for Bills of Exchange
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  Special Journals
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  Cash Book
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Bank Reconciliation Statement
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  Final Accounts
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  Work Sheet
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  Capital and Revenue Items
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  Valuation of Inventories
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  Accounts of Non-profit Making Organizations
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  Statement of Cash Flows
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  Accounting Ratios Analysis
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  Depreciation, Provisions and Reserves
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  Accounting Dictionary
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  Financial Calculators
 
 
 
Managerial Accounting Topics
  Financial Statements
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  Cost Volume Profit Relationship
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  Variable Costing System
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  Materials and Inventory Cost Control
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  Activity Based Costing System
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  Standard Costing and Variance Analysis
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  Balanced Scorecard
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  Capital Investment Analysis/Capital Budgeting
 
 

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