| Difference | Trading Account | Profit and Loss Account |
| 1. Meaning | The account prepared to find out gross profit or gross loss after recording transactions of receipts and issues of goods and expenses of purchases as well as production is called Trading Account. | The account prepared to find out net profit or net loss by deducting other expenses and adding other incomes in the gross profit or gross loss is called Profit and Loss Account. |
| 2. Objectives | Trading Account is prepared to find out the gross profit or gross loss of the business. | Profit and Loss Account is prepared to find out the net profit or net loss of the business. |
| 3. Debit side | Opening stock of goods, net purchases of goods and other expenses relating to purchases of goods and production are shown on the debit side of the Trading Account. | Gross loss, administrative expenses, selling and distribution expenses, financial expenses and other expenses and various losses are shown on the debit side of the Profit and Loss Account. |
| 4. Credit side | Net sales, Sale of scrap goods and closing stock of goods are shown on the credit side of the Trading Account. | Gross profit and other revenue incomes of the business are shown on the credit side of the Profit and Loss Account. |
| 5. Balance of account | Credit balance of trading account is called Gross profit whereas debit balance of trading account is called Gross loss. | Credit balance of Profit and Loss Account is called Net profit whereas debit balance of profit and loss account is called Net loss. |
| 6. Where the Gross profit or Gross loss is shown? | In the Trading Account Gross profit or Gross loss are shown at last. | In the Profit and Loss Account, Gross profit or Gross loss are shown in the beginning. |
| 7. Where the balance of account is transferred? | The balance of Trading Account is transferred to Profit and Loss Account. | The balance of Profit and Loss Account is transferred to Capital account in the liability side of Balance Sheet. |
| 8. Compulsory | It is not Compulsory to prepare Trading Account. Many business units do not prepare separate Trading Account. | It is Compulsory to prepare Profit and Loss Account for all the business units. |
