What is the primary purpose of preparing the trading account?
Understand the Problem
The question is asking about the main reason for creating a trading account in finance, and it presents multiple choice options related to its purpose.
Answer
To calculate the gross profit or gross loss for the accounting period.
The primary purpose of preparing the trading account is to calculate the gross profit or gross loss during an accounting year, which indicates the business's efficiency.
Answer for screen readers
The primary purpose of preparing the trading account is to calculate the gross profit or gross loss during an accounting year, which indicates the business's efficiency.
More Information
A trading account helps determine the efficiency of the core business activities by highlighting operational profits or losses before accounting for indirect expenses.
Tips
A common mistake is confusing the trading account's purpose with that of the profit and loss account, which includes all expenses and incomes.
Sources
- Basics of Trading Accounts - Toppr - toppr.com
- Purpose of Trading and Profit and Loss Account - BYJU'S - byjus.com
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