CH21 - The trading, profit & loss account

• A trading, profit & loss account is a historic view of a business's trading income and expenses over 12 months.
• The first part is known as a trading account and shows the sales of a business
• Parts of the Account :

  • Trading account -shows growth profit made
  • Profit and loss account - shows net profit
  • Approriation account - Distirbution of profit/loss
• Gross profit = total revenue - COGS
• Net Profit = Gross Profit - Expenses
• Gross profit is an indicator of how efficient the business is at making and selling products
• Net profit shows how efficient a business is overall as expenses and revenue are included