Trading Account

Trading account is the first part of the final accounts which is prepared to calculate the gross profit or loss of buying, manufacturing and selling of trading goods for a certain period. Gross profit if the difference between sales and cost of goods sold. If the amount of sales of goods is higher than the cost of goods sold, there is a gross profit. Reversibly, if sales figure is smaller the difference is gross loss. In the words of J.R. Batliboi, "The trading account shows the results of buying and selling of goods therefore, it does not include any items of operating expenses but transactions in goods are included."