Question:

Why is Trading Account prepared? Name any two items that are transferred to the credit of Trading Account.

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The Trading Account focuses on direct transactions, like purchases and sales, to ascer tain Gross Profit or Loss.

Updated On: Jan 13, 2026

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Solution and Explanation

The Trading Account is prepared to determine the Gross Profit or Gross Loss of a business during an accounting period. It records direct incomes and direct expenses related to the core business operations.

Two items transferred to the credit of Trading Account:
1. Sales (Net Sales).
2. Closing Stock

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Top Questions on Final Accounts

Prepare Trading Account, Profit and Loss Account, and Balance Sheet of M/s Sharma and Sons from the following information for the year ending 31^st March, 2023 when closing stock was valued at Rs. 20,000.
Trial Balance as on 31-3-2023

Name of Account	Debit Balance (Rs.)	Credit Balance (Rs.)
Opening Stock	19,400	–
Purchase and Sale	6,50,000	7,80,000
Returns	20,000	20,000
Debtors and Creditors	38,000	87,200
Bills Payable	–	25,200
Machinery	1,00,000	–
Building	2,50,000	–
Bank	10,000	–
Wages	40,000	–
Salaries	40,000	–
Interest	15,000	–
Capital	–	3,60,000
\(Total\)	12,72,400	12,72,400

Why is Trading Account prepared? Name any two items that are transferred to the credit of Trading Account.

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Solution and Explanation

Top Questions on Final Accounts

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