Meaning
Trading Account is the first stage in the process of preparing the final accounts . Trading Account shows gross profit earned or Gross loss incurred during the accounting year .It is credited with sales , services rendered and closing stock or inventory . Opening stock or inventory , Purchase and other direct experience are debited in the account . The difference in two sides is either gross profit or gross loss.
Featured of Trading Account
1. It is the first stage in the preparation of final accounts of a trading concern .
2. It records only net sales and direct cost of goods sold .
3. The balance of this account shows gross profit or gross loss.
4. Gross Profit or Gross Loss is transferred to profit and loss account .
Purpose of Trading Account
Trading Account is prepared to know the gross profit earned or Gross loss incurred for the accounting period . This account is based on matching sales of goods and services with the cost of goods sold and services rendered .
0 Comments