Trading Account - JSS3 Business studies Lesson Note

The trading account is a financial statement that shows the results of buying and selling goods during a specific period. It helps in determining the gross profit or loss of a business by comparing the revenue generated from the sale of goods with the cost of goods sold (COGS).

 

Example of a Trading Account:

Particulars

Amount (₦)

Sales Revenue

XXXX

Less: Cost of Goods Sold (COGS)

(XXXX)

Gross Profit (or Loss)

XXXX

 

Explanation:

• Sales Revenue: This represents the total amount of money earned from selling goods during the period.
• Cost of Goods Sold (COGS): This includes the direct costs associated with producing or purchasing the goods that were sold. It typically includes expenses like materials, labor, and manufacturing overhead.
• Gross Profit (or Loss): This is the difference between the sales revenue and the cost of goods sold. If the revenue is higher than the cost, it is a gross profit, otherwise, it's a gross loss.