Trading Account Format | Meaning | Example 2021:- The trading account is the first final account. It consists of opening stock, closing stock, direct expenses, direct income, by preparing a trading account we get gross profit or gross loss which helps us to find the net profit or net loss in the profit and loss account.
Trading Account Meaning 2021
A trading account is a statement that is prepared by the financial institutions, where it shows the gross profit of the business activities during a specific period of time. It is part of the final accounts. In other words, we can say that they give the details of total sales, total purchases, and direct expenses relating to purchase and sales. In this article, we will discuss the advantages of Trading account and Trading account format.
Advantages of Trading Account
- It is an important statement to know the correct value of expenses that are introduced during the production of goods in a company. By preparing the trading accounts entities can decide to continue and discontinue a particular product.
- With the help of the trading account, We can get the value of gross profit earned in a company during a specific period of time.
- It also helps the Excise authorities to assess the excise duties of business firms.
- The management can decide the price of the product with the help of the trading account.
Trading Account Format Examples 2021
During the end of the year, all the company’s processes, all the financial statements, and finalized are prepared. trading account is the first step in the processing of the final accounts of a company.
Trading Account is a nominee account in nature. Activities are generated revenue for the business such as Sales of Services or Goods, Closing stock is pop-up on the Credit side(Right Side) and Direct Expenses, Purchase, Opening Stock, are pop-up on the Debit Side (Left Side).