FINAL ACCOUNT
Lecture # 02
Trading Account
Trading account is nominal account which is prepared at the end of accounting
year. It is the first stage of final accounts A trading account helps in determining the
gross profit or gross loss of a business concern, made strictly out of trading
activities. Trading involves buying and selling activities.
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.
The account consists of two sides; debit side indicates direct expenses and
credit side is for direct incomes. Direct expenses which are incurred by the
organization, to bring goods into the condition, fit for sale. Such expenses include
fuel, power, freight, insurance, carriage inward, consumption of stores, etc. On the
other hand, direct incomes refers to income from the activities that are earned from
the sale of goods.
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Lecture # 02
Trading Account
Trading account is nominal account which is prepared at the end of accounting
year. It is the first stage of final accounts A trading account helps in determining the
gross profit or gross loss of a business concern, made strictly out of trading
activities. Trading involves buying and selling activities.
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.
The account consists of two sides; debit side indicates direct expenses and
credit side is for direct incomes. Direct expenses which are incurred by the
organization, to bring goods into the condition, fit for sale. Such expenses include
fuel, power, freight, insurance, carriage inward, consumption of stores, etc. On the
other hand, direct incomes refers to income from the activities that are earned from
the sale of goods.
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