Trading refers buying and selling of goods. Trading A/c shows the result of buying and selling of goods. This account is prepared to find out the difference between the Selling prices and Cost price. If the selling price exceeds the cost price, it will bring Gross Profit. For example, if the cost price of Rs. 50,000 worth of goods are sold for Rs. 60,000 that will bring in
Gross Profit of Rs. 10,000. If the cost price exceeds the selling price, the result will be Gross Loss. For example, if the cost price Rs. 60,000 worth of goods are sold for Rs. 50,000 that will result in Gross Loss of Rs.10,000. Thus the Gross Profit or Gross Loss is indicated in Trading Account.

Items appearing in the Debit side of Trading Account.
1. Opening Stock: Stock on hand at the commencement of the year or period is termed as the Opening Stock.
2. Purchases: It indicates total purchases both cash and credit made during the year.
3. Purchases Returns or Returns out words: Purchases Returns must be subtracted from the total purchases to get the net purchases. Net purchases will be shown in the trading account.
4. Direct Expenses on Purchases: Some of the Direct Expenses are.
i. Wages: It is also known as Productive wages or Manufacturing wages.
ii. Carriage or Carriage Inwards:
iii. Octroi Duty: Duty paid on goods for bringing them within municipal limits.
iv. Customs duty, dock dues, Clearing charges, Import duty etc.
v. Fuel, Power, Lighting charges related to production.
vi. Oil, Grease and Waste.
vii. Packing charges: Such expenses are incurred with a view to put the goods in the Saleable Condition.

Items appearing on the credit side of Trading Account
1. Sales: Total Sales (Including both cash and credit) made during the year.
2. Sales Returns or Return Inwards: Sales Returns must be subtracted from the Total Sales to get Net sales. Net Sales will be shown.
3. Closing stock: Generally, Closing stock does not appear in the Trial Balance. It appears outside the Trial balance. It represents the value of goods at the end of the trading period.