Why we carried forward the Gross Profit from the Trading Accounts to the Profit & Loss accounts?
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A trading profit and loss account serves two purposes: computing net income for the period and identifying major revenue and expense items that affect net income. An accountant computes net income by subtracting expenses from revenues.
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Trading account is useful for businesses that are dealing in the trading business. This account helps them to easily determine the overall gross profit or gross loss of the business. The amount thus determined is an indicator of the efficiency of the business in buying and selling.
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