Items included in the debit or Credit side of the trading account :-

 TRADING ACCOUNT :
                                                              Trading account is prepared by trading concerns,i.e.,concerns which purchase and sell finished goods , to know the gross profit or gross loss incurred by them from buying and selling of goods during a particular period of time.Gross Profit or Gross Loss is the difference between the cost of goods and the proceeds of their sale.If the sale is proceeds exceeds the cost of goods sold , gross profit is made . Otherwise , gross loss incurred.


                               ( HORIZONTAL FORM )

                               TRADING ACCOUNT OF...

The gross Profit represents the credit balance of trading account.If Trading account shows a debit balance , it will represent the amount of gross loss .
There is another way to ascertain Gross Profit or Gross Loss which is generally used for reporting i.e. vertical Form Format of which is given below:
                                (VERTICAL FORM)
                                 Trading Account Of...
                  

  

Items included in the debit or Credit side of the trading account :-

Followings are the items which are include in the debit side of the trading account

1. Opening Stock: Opening stock consists of raw materials , work in progress and finished goods depending upon the nature of business. In merchandising business , the opening stock consists of finished goods. In manufacturing concern , opening stock consists of raw materials.

2. Purchase:-

Purchase includes both credit purchase and cash purchase. Purchase is available in trial balance. So, both cash purchase and credit purchase are recorded in the debit side while preparing trading account.

3. Purchase Returns:- Purchase returns is appear in the credit side of trial balance. Purchase returns may be shown by deduction from purchases.

4. Direct Expenses:- Direct expenses means all the expenses which are directly attributable to the purchase of goods. These are the some examples of direct expenses which appear in the debit side of trading account:

a. Direct labour or direct wages.

b. Freight on purchase.

c. Carriage on purchase.

d. Fuel , power and lighting expenses.

e. Packing charges.

f. Manufacturing expenses.

g. Commission on purchase.

CREDIT SIDE ITEMS :-

1.Sales:- Sales include both cash sales and credit sales. Both types of sales are recorded in the credit side while preparing the trading account of the business firm.

2.Sales Returns:- Sales returns must be deducted from total sales and to be shown in the credit side of trading account. Sales returns are the sold goods which are returned from customers.

3.Closing Stock:- Closing stock means the value of goods which are remain unsold in a particular accounting period. Closing sock may be in the form of raw materials ,. work in progress or finished goods. Closing stock is valued at cost or market price. It also appears in the credit side of trading account.