A trading account is the part of the income statement structure used to compare sales with cost of goods sold and determine gross profit.
A trading account is the part of the income statement structure used to compare sales with the cost of goods sold in order to determine gross profit or gross loss.
It is especially associated with businesses that buy and sell goods or hold inventory for resale.
The trading account links inventory accounting to performance reporting. It brings together:
That makes it a useful bridge between inventory measurement and the profit-and-loss framework.
The trading account is concerned with gross profit, not net profit. It focuses on the direct relationship between revenue from goods sold and the cost attributed to those goods.