what is trading account in accounting

In accounting, a trading account is an account used to determine the gross profit or gross loss of a business resulting from trading activities. The trading account is the first step in preparing the Profit and Loss Statement and Balance Sheet. Direct sales and direct expenses related to the production or procurement of a product are taken into account while preparing the trading account. The closing stock and opening stock of goods are also taken into account to arrive at the gross profit or loss. The gross profit or loss can be determined only from the trading account. Trading accounts can be any investment account containing securities, cash, or other holdings. Most commonly, trading account refers to a day traders primary account. Day traders buy and sell securities frequently, often within the same trading session, and their accounts are subject to special regulation as a result. The assets held in a trading account are separated from others that may be part of a long-term buy and hold strategy.