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Trading Account for the Period . ....

£ £ £
Sales XXXX
less Sales returns (Returns inwards) XXXX
Turnover XXXX
Cost of goods sold:
Opening inventory XXXX
Purchases XXXX
less Returns (returns outwards) XXXX
XXXX
add Carriage inwards XXXX XXXX
XXXX
less Closing inventory XXXX XXXX
Gross Profit/(Loss) XXXX

Gross profit may be defined as "the excess of the selling price of goods over their costs
price, due allowance being made for opening and closing stocks, and for the costs incidental
in getting the goods into their present condition and location".

1. Step by step explain in detail the use of each column in the table given above

1 answer

Sales: This column represents the total amount of sales made during the period. This includes the selling price of goods or services.

Sales returns (Returns inwards): This column represents the amount of sales that have been returned by customers during the period. This is deducted from the total sales to arrive at the net sales figure.

Turnover: This column represents the net sales figure after deducting sales returns. It is the total amount of revenue generated from selling goods or services.

Opening inventory: This column represents the value of the inventory at the beginning of the accounting period. It is used to calculate the cost of goods sold.

Purchases: This column represents the total amount spent on purchasing goods during the period.

Returns (returns outwards): This column represents the amount of purchases that have been returned to suppliers during the period. This is deducted from the total purchases to arrive at the net purchases figure.

Carriage inwards: This column represents the cost of transporting goods purchased into the business. It is added to the cost of purchases to calculate the cost of goods available for sale.

Closing inventory: This column represents the value of the inventory at the end of the accounting period. It is subtracted from the cost of goods available for sale to arrive at the cost of goods sold.

Gross Profit/(Loss): This column represents the difference between the net sales and the cost of goods sold. It shows the profitability of the business before deducting other expenses. A positive figure indicates a profit, while a negative figure indicates a loss.