Trading Account
Trading Account:- Preparation of Trading Account is the first stage in the financial accounts. Trading Account is prepared by the trader for ascertaining the gross profit or gross loss. This account is prepared to find out the difference between the actual cost of the goods sold and the sale proceeds. It shows the profit or loss made by purchase and sale of goods without taking into account all the items of business expenditure such as general, distributive and administrative expenses. Therefore, in the trading Account it is necessary to include all items of charge directly affecting the cost of goods sold. Gross profit is said is be made when the sale proceeds exceed the cost of goods sold. When sale proceeds are less than the cost of the goods sold, gross loss to incurred. The following is the usual from of a Trading Account. Note: * When Credit side of the Trading Account is more than the debit side the difference represents gross profit. * When the debit side of the