For preparing final accounts, we make trading account before making profit and loss account and balance sheet. Main motive of making of this account is to calculate gross profit or gross loss. Gross profit or gross loss is difference of net sale and cost of goods sold. So, we will have to show all items of opening stock, net purchase, direct expenses, closing stock and sale for calculating of gross profit through this account.
Debit Side of Trading Account
1. Opening Stock
2. Net purchase ( total purchase - purchase return)
3. Direct Expenses
4. Gross profit ( Credit side total - debit side total )
Credit Side of Trading Account
1. Net Sale ( Gross sale - sale return )
2. Closing Stock
3. Gross Loss ( Debit side total - credit side total )
Debit Side of Trading Account
1. Opening Stock
2. Net purchase ( total purchase - purchase return)
3. Direct Expenses
4. Gross profit ( Credit side total - debit side total )
Credit Side of Trading Account
1. Net Sale ( Gross sale - sale return )
2. Closing Stock
3. Gross Loss ( Debit side total - credit side total )
