Question

Which of the following is not an advantage of Trading Account?

• A. The percentage of Gross Profit serves as a guide in fixing the selling price of the goods in future
• B. The percentage of Net Profit on sales can be ascertained
• C. The stock at commencement can be compared with the stock at end in order to ascertain whether the purchases have been wise
• D. The trading account affords facilities for comparing the figures of sales and direct expenses with those of previous years.

Answer 1

The correct option is B The percentage of Net Profit on sales can be ascertained

Trading account is prepared to know the Gross Profit of the business. To know the gross profit , major components are like sales , purchases opening stock, closing stocks and direct expenses are considered.

Format for the Trading account is as under:

Trading Account

To Opening Stock xxxxx By Sales xxxxx

To Purchases xxxxx By Closing Stock xxxxx

To Direct Labour xxxxx

To Direct Expenses xxxxx

To Gross Profit xxxxx

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xxxxx xxxxx

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