Trading account is prepared to know _________.

Gross profit

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Net profit

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Both (A) and (B)

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None of the above

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Solution

The correct option is C Gross profit
To know the financial position of the business, financial statements are prepared. Normally the financial statements are prepared at the end of the financial year.

Trading account includes the items of purchase and sale of trading goods and direct expenses. The overall outcome of trading account is to know the gross profit of the business.

Suggest Corrections

Similar questions

State whether the following statement are true or false.

1. Final Accounts are prepared on the basis of Trial Balance.
2. Trading Account is a part of Profit & Loss Account.
3. Profit Loss Account is prepared to find out Gross Profit or Gross Loss.
4. Gross Profit or Gross Loss is transferred to Balance Sheet.
5. An amount of net profit is added to the capital.
6. All indirect expenses are debited to trading account.
7. Balance Sheet is a statement and not an account.
8. Capital account is a personal account.
9. Amount of prepaid expenses appears on assets side.
10. Bank Overdraft is a liability of business concern.

Q. Steps of preparing Final Accounts is -
(a) Trading Account
(b) Profit and Loss Account
(c) Balance Sheet

Q. Professional people like solicitors, doctors, company secretary, cost accountant, chartered accountants etc., prepare for themselves ___________ which is a modified form of Income & Expenditure A/c prepared by non-trading concerns.

Q. Difference between the Preparation of final accounts of a partnership firm & Sole trading concern is:

Q. From the following balances extracted from the books of Sh. Badri Vishal on 31st March, 2017, prepare a Trading Account, P & L A/c and a Balance Sheet. Closing Stock valued on that date was ₹ 15,000.

	Dr. (₹)	Cr. (₹)
Capital		1,28,200
Household Expenses	10,000
Sales		1,80,000
Return inwards	4,000
Return outwards		6,000
Purchases	1,50,000
Cash at Shop	1,600
Bank Overdraft		15,000
Interest on Overdraft	1,500
Creditors		17,800
Stock at the Commencement	18,000
Freight	8,500
Rent and Taxes	7,000
Debtors	32,600
Commission	3,000	2,200
Freehold property	30,000
Sundry expenses	3,900
Salaries and wages	20,000
Life Insurance Premium	1,800
Insurance Premium	1,600
Motor Vehicle	39,800
Typewriter	8,000
Interest		800
Carriage inwards	2,000
Carriage outwards	800
Power	2,200
Audit Fee	1,700
Lighting	2,000
	3,50,000	3,50,000

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