Trading & p&l A/C and Balance Sheet

1. TRADING
P&L A/C
AND
BALANCE SHEET

2. Trading Account
• The trading account reveals the gross profit of
the business.
• Gross profit is the difference between sales
revenue and the direct cost of the goods sold.

3. • Cost of goods sold is the cost of purchasing
the goods from suppliers (in case of retailing
business) or the cost of producing the goods
that are sold.

5. Profit and loss account
• This account shows the net profit of the
business.
• Net profit = (Gross Profit – Expenses and
Overheads) + Income from non trading
activities

7. Balance Sheet
• Balance sheet shows the value of a business’s
assets and liabilities on a particular date.

8. • It records what the firm owns (assets), what it
owes (liabilities), what it is owed and how it is
financed (owner’s equity).