A_TeamCurious In: 1. Financial Accounting > Financial Statements Which type of account is trading account? Which type of account is trading account? Share Facebook You must login to add an answer. Username or email* Password* Captcha* Remember Me! Forgot Password? Need An Account, Sign Up Here 1 Answer Voted Recent Bonnie Curious MBA (Finance) 2022-12-13T08:33:24+00:00Added an answer on December 13, 2022 at 8:33 am This answer was edited. As per the Golden Rules As per the golden rules of accounting, a trading account is a nominal account. To ensure that financial statements accurately reflect a business’s financial position and performance, the golden rules of accounting guide the preparation of financial statements. The point to note is that it is almost impossible to apply the rules of debit and credit with certain accounts such as Trading A/c, Profit & Loss A/c, etc. As per the Modern Rules The purpose of a trading account is to record transactions related to the purchase and sale of goods for a business. In other words, it serves as a recording and reporting mechanism for business income and expenses. An accounting period, like a month, quarter, or year, is the time when a trading account is prepared. It is used to calculate the business’s net profit or loss. Other financial statements, such as the balance sheet, are prepared using the information in a trading account. In summary, a trading account is a type of income statement account that is used to track and report on the income and expenses from a business’s buying and selling activities Rules of Debit and Credit There are three main types of accounts according to the legacy rules of debit and credit: personal accounts, real accounts, and nominal accounts. A personal account is one that is related to an individual or entity owing the business money (e.g. a customer), or owing the business money (e.g. a supplier). A real account is one that relates to assets such as cash, inventory, and property. Nominal accounts are accounts that relate to income and expenses, such as a “trading account”. To summarize, a trading account is a nominal account used to record and report the business’s income and expenses resulting from its buying and selling activities. 0 Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Related Questions What are some examples of deferred revenue expenses? Are brands intangible assets? What comes in debit side of Realisation account? What is recorded in the Realisation account? What is not included in Realisation account? What is recorded on the credit side of a Realisation account? Can accounts payable have a debit balance?