The major focus of the trading account is to show the gross margin of a business. Gross margin is the difference between the total sales revenue and the cost of goods sold (COGS), which represents the direct costs associated with producing and selling the products or services.
The trading account summarizes the financial transactions related to buying and selling goods during a specific period, typically a year. It includes the total value of purchases made during that period and the total value of sales generated from those purchases. By subtracting the total COGS from the total sales, the gross margin is calculated.
The gross margin is an important measure of a company's profitability and helps determine the amount of money available to cover operating expenses and generate net profits. The trading account is a crucial part of a company's financial statements and is used to evaluate the efficiency of its operations and its ability to generate profits.