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- A trading account is prepared in accounting to12345:
- Maintain a record of goods sold and purchased.
- Establish whether the sale of goods resulted in a gross profit or gross loss.
- Provide a basis for the calculation of net profit or loss.
- Provide information useful for management accounting.
- Comply with accounting standards and regulations.
- Prepare the basis of the income statement for the accounting period.
Learn more:✕This summary was generated using AI based on multiple online sources. To view the original source information, use the "Learn more" links.The purpose of creating a trading account in accounting is to:
- Maintain a record of goods sold and purchased.
- Establish whether the sale of goods resulted in a gross profit or gross loss.
www.accountingcapital.com/basic-accounting/tradi…It is used to calculate the gross profit or loss of a business that is engaged in buying and selling goods. The trading account is one of the first parts of the financial statements and is prepared before the profit and loss account.www.investoinfo.com/blog/trading-account/Trading account is the first step in the process of preparing final accounts. It helps in finding out the gross profit or gross loss during an accounting year, which is an important indicator of business efficiency. It is normally prepared by a merchandising concern which purchases and sells the goods during a particular period.www.toppr.com/guides/fundamentals-of-accounting…The answer is that a trading account is necessary since it provides several advantages, such as:-disclosing gross profit from which all expenses are deducted to find out the true profit of the business -calculating net sales -understanding the progress or failure of a business by comparing net sales of the current year with those of the previous yearwww.financestrategists.com/accounting/final-accou…In the trading account, the cost of goods sold is subtracted from net sales for the period to calculate gross profit. Only direct revenue and direct expenses are considered in it. Trading account is prepared mainly to know the profitability of the goods bought by the businessman.www.toppr.com/guides/accountancy/financial-state… - People also ask
Trading Account | Format, Calculation, Advantages, Examples
A trading account has multiple features. A trading account is a nominal account. Also, it is prepared on the last day of an accounting year, and it is the first stage of the final account of a trader and the second stage of the final accounts of a manufacturer. Only revenue transactionsare included in a … See more
Thetrading accountshows the result of buying and selling goods. This account determines the gross profit or the gross loss of a trader at the stage of final accountspreparation. The following items usually appear on the debit and creditsides of a … See more
From an accounting perspective, gross profit or gross loss is the difference between sale proceeds of a certain period and the cost of … See more
This accountcomprises items directly related to trading, i.e., net sales + closing stock minus opening stock+ net purchases + direct expenses = … See more
Profit or loss determined through the trading account is not the net result of the business. This means that a question naturally arises: what is the use of preparing a trading account? The answer is that a trading account is necessary since it provides … See more
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