What's the difference between the Trading Account and the P&L Account?
The Trading Account produces “gross profit” (sales − cost of goods sold). The P&L Account takes gross profit and subtracts the remaining expenses to produce “net profit.” In modern IFRS-compatible accounting, both merge into a single income statement that shows gross profit and net profit as subtotals.
The two accounts side by side
The Trading Account
Produces gross profit
- Purpose
- Measures your core trading profit: how much above cost you sold
- The formula
- Sales − Cost of Goods Sold
- Cost of Goods Sold
- Opening stock + purchases − closing stock
- The result
- Gross profit
The Profit & Loss Account
Produces net profit
- Purpose
- Measures the final profit after all expenses
- Its input
- Gross profit coming from the Trading Account
- Subtracts & adds
- Subtracts operating & admin expenses, adds other income
- The result
- Net profit
The full chain: from sales to net profit
Net sales
Total sales after returns
Cost of goods sold
The cost of what you actually sold
Gross profit
This is what the Trading Account produces
Operating expenses
Rent, salaries, electricity…
Operating income
Profit after operating costs
Other income & expenses
Interest, FX differences…
Net profit
This is what the P&L Account produces
Old vs. modern (IFRS)
The old method
Two separate accounts
- Trading Account
- A standalone statement for gross profit
- P&L Account
- A second statement that turns gross into net profit
- Presentation
- Two separate parts for one result
The modern, IFRS-compatible method
What Zemam follows — one income statement
- The income statement
- A single statement combining both
- Subtotals
- Shows both gross profit and net profit within it
- The advantage
- Same information, a cleaner and clearer IFRS-compliant presentation
Frequently asked questions
So I won't find a separate “Trading Account” in Zemam?
No, and that's by design. The modern IFRS-compatible method merges both into one income statement that shows gross profit and net profit as subtotals — the exact same information, presented more cleanly.
What's the difference between gross profit and net profit?
Gross profit = sales − cost of goods sold (trading profit before operating costs). Net profit = gross profit − remaining expenses + other income (the final profit that reaches your pocket).
Why does gross profit on its own matter?
Because it measures your core efficiency — how much above cost you sell — separate from admin costs. It's a key pricing signal: a weak gross profit means the problem is your selling price or purchase cost, not your overheads.
Zemam's income statement shows both gross and net profit
One income statement showing net sales, cost of goods sold, gross profit, operating expenses, operating income, and net profit — for any period, from double-entry. And COGS is computed automatically with every sale (WAC/FIFO), so your gross profit is always live.
Note: the income statement follows IFRS presentation, but classification and disclosure details may vary by activity — check with your accountant.