What is meant by a trading and profit and loss account?

Question

Accepted Answer

Trading and profit and loss account is a financial statement that shows the company's revenue, expenses, and net profit or loss for a specific period.

Trading and profit and loss account is prepared to determine the profitability of a business.
It includes all the revenue earned and expenses incurred during a specific period.
The account starts with the opening stock, includes purchases, sales, direct expenses, indirect expenses, and ends with the closing stock.
The difference between the total revenue and total expenses represents the net profit or loss.
It helps in assessing the financial performance and efficiency of the business.
Example: If a company's total revenue is $100,000 and total expenses are $80,000, the net profit would be $20,000.

Accepted Answer

The trading and profit and loss account are two different accounts that are formed within the general ledger. The two parts of the account are:

1. Trading Account

2. Profit and Loss Account

Trading account is the first part of this account, and it is used to determine the gross profit that is earned by the business while the profit and loss account is the second part of the account, which is used to determine the net profit of the business.

Accepted Answer

Profit and loss account is also know as statement of financial performance which is used to show the financial performance of a company while trading account is used to show profit earning through various trading activity

Accepted Answer

The trading account gives information related to profit earned or loss through various trading activities. Whereas the profit and loss, account determine the net profit or loss for the period. Trading and P&l accounts are used to calculate the gross profit and net profit of the organization.