Question

Answer in one sentence.

Why is Trading Account prepared?

Answer 1

A Trading Account is prepared to ascertain the trading results of a firm in the form of gross profit earned or gross loss incurred as a result of buying and selling of goods during an accounting period. It is a nominal account in which the opening stock, purchases and all direct expenses are recorded on the debit side, whereas sales and closing stock are recorded on the credit side. Excess of the credit side over the debit side is regarded as gross profit and excess of the debit side over the credit side as gross loss.