Trading account and profit and loss account difference
Headings The two sides are headed as assets and liabilities The two columns are headed as debit and credit. The purpose is to establish the arithmetical accuracy of the books of account. The Balance Sheet shows the financial position of a business as a going concern. This is why the balance sheet has the heading: Grouping and Marshalling Arrangement of Assets and Liabilities The assets and liabilities should be shown in a certain order in the Balance Sheet.
Gain on sale of Machine. This Account appears in the Balance Sheet. Headings The two sides are headed as assets and liabilities The two columns are headed as debit and credit.
Net Profit is transferred to the Capital Account. It is prepared at a particular date, rather on the close of the day and not for a period. In the order of liquidity - Liquidity means the facility with which the assets may be converted into cash; those assets which are most difficult to convert into cash are written last. These are discussed subsequently.
On the left - hand side, the liabilities of the business are shown whereas on the right - hand side the assets of the business appear. It is true only on that date and not later. A Balance Sheet is prepared with a view to measure the true financial position of a business at a particular point of time. A Trial Balance can be prepared at any stage, without even making adjustments.
After you have finished the test, press on the 'Finish Test' button to know your score and get the correct answers. Take a Quiz now. It shows the status of the business as at a given moment of time, in so far as accounting figures can show its status. It is true only on that date and not later. It does not depend on the amount of net profit It depends on the amount of gross profit 6.