Need or Importance of Trading Account

Some of the objectives of preparing Trading account are as follows:

1. To determine the cost of production which helps to calculate the gross profit or loss of trading activities.
2. To assemble all the direct expenses of bringing the goods in saleable condition.
3. To ascertain the performance of different years of business through the gross profit ratio which is calculated by dividing the gross profit by sales.
4. To help to calculate the ratio of cost of goods sold to sales which is helpful in the fixation of price of the products.