Gross profit is calculated in the

Gross profit is calculated in the trading account. The trading account is a financial statement that calculates the gross profit earned or the loss incurred by a business entity during a specific period. Gross profit is the profit made by a company after deducting the cost of goods sold (COGS) from its net sales revenue. The formula to calculate gross profit is: Gross Profit = Net Sales Revenue - Cost of Goods Sold (COGS) The trading account lists all the direct expenses and revenues of a business, including the opening and closing stock, purchases, and sales. It also takes into account any adjustments made for returns, discounts, and allowances. Thus, the trading account provides a comprehensive view of the company's gross profit earned during the period under consideration. The gross profit is then transferred to the profit and loss account to calculate the net profit earned by the company.