Important Items of Trading Account

Opening Stock 

Unsold goods of last year, taken on the debit side at the beginning of the year. 

Closing Stock 

Goods remaining unsold at the end of the year, shown on the credit side. 

Note : Opening Stock is given in the Trial Balance but closing stock is given below the Trial Balance generally because closing stock is valued after the accounts have been closed. Goods and components of Closing Stock and also valuation of closing stock are described later on. 

Purchases and Purchase Returns 

These, as also Discounts on Purchases, are given under the debit side. 

All Direct Expenses 

These are shown on the debit side. These include the expenses in the manufacture of the goods and expenses incurred in procuring/importing the goods and getting 

them to the go down. 

• Wages are shown on the debit side of the Trading A/c and show the wages paid in the production of goods. [Note : If a new (or newly bought, though on second-hand) machine is to be brought in and installed, the wages paid in this instance will be treated as part of the cost of the machine and will be shown in Assets and not in the Trading A/c.] [Note : The term Wages is often used in the context of specific jobs whereas the term Salaries is used when a range of jobs with continuing responsibility is implied on the receiver. Accordingly, convention exists that an expense recorded as "Wages" or as "Wages and Salaries" would go to the Trading A/c; but if recorded as "Salaries and Wages" it would go to the P & L A/c.] 
• Carriage Inward refers to the damage (charges along with any incidentals) paid to get the goods to the go down, inclusive of minor expenses called "Cartage", etc. and this too is shown on the debit side of the Trading A/c. 

Manufacturing Expenses 

Besides what are included under Direct Expenses, there are other expenses involved in any manufacturing process. Items of expense such as 

1. Coal, Water and Gas, 
2. Factory Lighting, 
3. Fuel and Power, and 
4. Other Motive Powers 

are included in this. These too belong to the debit side. 

Carriage and Freight 

This is to be distinguished from what is given under carriage inward (or carriage and cartage) under Direct Expenses. Whereas Direct Expenses refer to the expenses that are incurred in bringing the goods to salable conditions, carriage and freight  refer to such costs incurred thereafter to transport the goods for purposes of sale - shown under debit side. 

Wages and Salaries 

These include such costs incurred in the sales of the goods beyond their manufacture (e.g. allowances to travelling sales persons, their special attire and special baggage) - shown under debit side. 

Other Items 

These are like Octroi, Rents and Rates for Factories, Duty on the import content of the goods sold, and are also shown on debit side. 

Sales 

Sales are shown on the credit side. 

Sales Returns 

Sales returns are also shown on the credit side, and are to be deducted from sales.