Trading Account help us to determine the gross profit or total loss of business concerns, created strictly from trading activities. Trading involves buying and selling activities.<\/p>\n\n\n\n
In the Trading Account, the cost of goods sold is subtracted from the net sales for that period to calculate the gross profit. <\/p>\n\n\n\n
Only direct income and direct costs are considered.<\/p>\n\n\n\n
The difference between the selling price and the cost of sales is the profit of the businessman, also called the Gross Profit.<\/p>\n\n\n\n
Gross Profit = Selling Price – Cost of sales<\/strong><\/p>\n\n\n\n Net income, on the other hand, means all revenue minus all costs.<\/p>\n\n\n\n For instance including cost of goods sold, selling, general and administrative expenses, and non-operating expenses.<\/p>\n\n\n\n