SHIPPER'S TRADING ACCOUNT
46. The trading account of the shipper is made up somewhat differently than for a mercantile business where all sales are supposed to be entered at a profit.
If all his produce is sold through commission merchants, and the inventory of produce in stock exactly equals the difference between purchases and shipments, the account, profit and loss on shipments represents the trading profit. But this state of affairs seldom if ever exists. Either there will have been outright sales or a discrepancy will appear in the inventory. The latter is usually the case in a produce business, for some value will be lost owing to the perishable nature of the goods handled.
The trading account is charged with all purchases and inventory, if any, at beginning of the period, and credited with all shipments and inventory at end of period.
The trading account now exhibits the true trading profits with a complete segregation of profits from actual sales and commission sales. The inventory does not include outstanding shipments, these being treated as a separate item in the balance sheet.
TRADING a/c
| To Purchases | $10,000 | 00 | By shipments | $9,000 | 00 |
| Profit on Sales | 465 | 00 | " Inventory | 1,465 | 00 |
| $10,465 | 00 | ||||
| By Profit on Sales | $465 | 00 |