Difference Between Trading Account and Profit and Loss Account:

Learning Objectives:

1. What is the difference between account and profit and loss account?

The main difference between trading account and profit and loss account is that the gross profit or loss which is derived from the trading account shows the trend of the business and the profit and loss account reflects on the management of the business the final outcomes of the concern. Trading account deals with the cost price of the goods. All the expenses directly connected with the buying of goods are entered in it. It is credited with the sale proceeds of the goods. Profit and loss account deals with the expenses indirectly connected with the goods (expenses with the selling of the goods.)

You may also be interested in other articles from “final accounts” chapter:

1. Trading Account
2. Profit and Loss Account
3. Difference Between Trading Account and Profit and Loss Account
4. Balance Sheet
5. Difference Between Trial Balance and Balance Sheet
6. Examples of Trading and Profit and Loss Account and Balance Sheet

Other Related Accounting Articles:

• Distinction/Difference Between Trial Balance and Balance Sheet
• Final Accounts
• Profit and Loss Account in Statement Form/Income Statement
• Trading Account