Trading Account shows the calculation of Gross Profit or Gross Loss from the sales of goods. Structure: Debit Side (costs): Opening Inventory, Purchases, Direct Expenses; Credit Side (income): Sales, Closing Inventory. Formula: Gross Profit = Sales - Cost of Goods Sold. Cost of Goods Sold = Opening Inventory + Purchases + Direct Expenses - Closing Inventory. Direct expenses include: Carriage Inward, Freight on Purchases, Import Duties, Customs, Wages (manufacturing), Packaging, Printing (labels), Direct Labor. Opening Inventory is the inventory from prior period (closing inventory of previous year). Closing Inventory is the physical inventory at year-end, calculated from stock taking. Purchases include goods purchased for resale; excludes capital items and materials for own use. Sales are the revenue from selling goods, reduced by sales returns. Calculation steps: Open Trading Account with Opening Inventory in debit; add purchases and direct expenses; calculate total; show closing inventory on credit side; calculate gross profit/loss. Gross Profit Ratio = Gross Profit / Sales × 100. Analyze trading account for efficiency: High COGS ratio means purchasing or inventory control issues. The account shows operational efficiency in production/trading. Exam tip: Practice creating Trading Accounts with various scenarios; master identification of direct vs indirect expenses; understand inventory treatment in opening and closing positions.