what is the difference between trading account and profit and loss account?



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explain this?

1 Answer(s)


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Basic difference is that Gross profit or loss which is derived from the trading account(i.e. opening inventory + purchases - closing inventory).
Trading account deals with Cost price of Goods such as expenses directly connected with buying of goods.
Profit and Loss deals with expenses that are indirectly connected. For eg. When selling of Goods. Even shows the summary of sales, cost of goods sold and expenses for the business for the year ending.

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