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TRADING ACCOUNT

Meaning

An Income statement prepared with cost of raw material, purchases and direct expenses (expenses on acquiring and manufacturing goods) with a view to ascertain gross Profit or Loss is known as Trading Account.

 

Direct Expenses

(i) Expenses on acquiring goods

Carriage and cartage (inward)

Freight inward

Octroi and local taxes

Excise duty

Import duty, landing and clearing charges.

 

(ii) Expenses on manufacturing goods

Coal, gas, water and fuel

Wages (Productive)

Fuel, power and motive power

Consumable stores

Manufacturing expenses

Factory expenses.

Direct expenses form part of the cost of goods purchased or manufactured. It does not include selling and distribution expenses.