Q1 What is Trading Account?
Ans :- Trading Account may be defined as an account which is prepared to ascertain the gross profit or gross loss of a business concern for a given time period. Gross profit or gross loss is the difference between actual sale proceeds and the cost of goods sold, including direct expense.
Q2. What is a Profit and Loss Account?
Ans:- A Profit and Loss Account is an account prepared to know the net profit/loss. It is also a nominal account and represents second stage.
According to Prof. Carter, "Profit and Loss Account is an Account into which all gains and losses are collected in order to ascertain the excess of gains over the losses or vice versa"
Q3. What is a Balance Sheet ?
Ans:- Balance sheet is a list of the accounts having debit balance or credit balance in the ledger. On one side it shows the accounts that have a debit balance and on the other side the accounts that have a credit balance. The purpose of a balance sheet is to show a true and fair financial position of a business at a particular date. Every business prepares a balance sheet at the end of the account year.
According to Francis R. Stead, "Balance sheet is a screen picture of the financial position of a going concern at a certain moment."