A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 53 - 53 of 53

Question 53


Write in Short

Short Answer▾

What is a trading account?


Trading account is prepared in accountancy to calculate the gross profit or gross loss arising or incurred due to the trading activities of a business. In other words, it is prepared to show the result of manufacturing, buying, and selling of goods. If amount of sales exceeds the amount of purchases and the expenses directly connected with such purchases, the difference is termed as gross profit. On the contrary, if purchases and direct expenses exceed the sales the difference is called gross loss. A trading account records the amount of purchases of goods and the expenses which relate to either purchase of raw material or manufacturing of goods are recorded in the trading account. All such expenses are called “Direct Expenses”

“Trading account shows the result of buying and selling of goods. In preparing this account, the general establishment charges are ignored and only transactions in goods are included”

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