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288 Accountancy As result of the foregoing discussion, we will now learn how the trading and profit and loss account can be prepared from the trial balance, the format of which is shown in figure 8.2. However, this list is not exhaustive. In real sense, there can be many more of other items, which we will be dealing at the later stage and there you will notice how this format undergoes a change with respect to each one of them. Trading and Profit and Loss Account of ABC for the year ended March 31, 2026 Dr. Cr. Expenses/Losses Amount Revenues/Gains Amount ` ` Opening stock ..... Sales ..... Purchases ..... Wages ..... Carriage inwards/ ..... Freight inwards/cartage Gross profit c/d 1 Gross loss b/d 2 xxx xxx Gross loss c/d 1 ..... Gross profit b/d ..... Rent/rates and taxes ..... Inerest received ..... Salaries ..... 2 ..... Repairs and renewals .....  Net loss  Bad debts .....   Net profit (transferred to .....   capital account)  xxx  xxx 1,either of the items computed Fig. 8.2 : A format trading and profit and loss account 8.4.3 Concept of Gross Profit and Net Profit The trading and profit and loss can be seen as combination of two accounts, viz. Trading account and Profit and Loss account. The trading account or the first part ascertains the gross profit and profit and loss account or the second part ascertains net profit. Trading Account The trading account ascertains the result from basic operational activities of the business. The basic operational activity involves the manufacturing, purchasing and selling of goods. It is prepared to ascertain whether the selling Reprint 2026-27