A trading account is prepared to disclose the

A trading account is prepared to disclose the gross profit or loss for the year. The purpose of a trading account is to determine the gross profit earned or loss incurred during the financial year. Gross profit is the difference between the net sales revenue and the cost of goods sold. The trading account takes into account all the revenues and costs directly associated with the production and sale of goods or services, such as the cost of raw materials, labor costs, and overhead expenses. The final figure in the trading account represents the gross profit or loss, which is then transferred to the profit and loss account to calculate the net profit or loss for the year.