Trading Account

Trading account only must have

• stock
• purchases
• sales
• purchases returns
• sales returns
• carriage inwards

• Purchases Returns a/c

Purchase Returns a/c is a nominal account. It provides the information relating to the value of goods/stock returned to the seller from whom the stock has been purchased.

Being a nominal account, this account is closed at the end of the accounting period.

• Sales Returns a/c

Sales Returns a/c is a nominal account. It provides the information relating to the value of goods/stock returned by the buyers to whom the stock has been sold.

Being a nominal account, this account is closed at the end of the accounting period.

• Gross Purchases and Gross Sales

The Purchase Returns a/c and the Sales Returns a/c provide information relating to returns only.

Since returns are recorded separately using these accounts, the Purchases a/c and Sales a/c give the information relating to the Gross Purchases and Gross Sales. 

• Need for information relating to Net Values

Along with the information relating to the returns and the gross values, the organisation needs the information relating to the net values i.e. the net purchases and net sales made by it.