Are you ready to progress in your bookkeeping career?

This course is a natural progression from Bookkeeping Foundations which focused on accounting for trading businesses. This course will look at further applications for accounting.


Trading businesses have a major asset which most service businesses do not. That asset (known as ‘stock’, ‘merchandise’ or ‘inventory’) is unique in character – it is obtained by the businesses for one purpose only: selling to customers. Unlike other assets which are obtained and retained by a business, a trading business must rely for its survival on the constant sale of this asset. Because of this, trading businesses need to be able to account for this asset and the individual lines of merchandise which make it up.



Distance Education Course

  • Learn Bookkeeping for Trading Businesses
  • Trading businesses have a major asset which most service businesses do not. That asset (known as ‘stock’, ‘merchandise’ or ‘inventory’)
  • Extend your bookkeeping skills beyond Introduction to Bookkeeping
  • Work in bookkeeping; start a business or get a job



There are 10 lessons as follows:

  1. Introduction - Review of Accounting Foundations
  2. Decision Making - How to Manage Your Bookkeeping
  3. Managing Cash Flow, Obtaining Finance and Managing Bad Debts
  4. Managing the Inventory Part 1
  5. Managing the Inventory Part 2
  6. Profit and Loss
  7. Establishing and Managing Control Accounts
  8. Budgeting Part 1
  9. Budgeting Part 2
  10. Financial Statement Analysis


Duration: 100 Hours (Nominal Duration).


So You Understand the Steps in Processing Stock Transactions?

To process transactions involving stock, the following steps are taken:
  1. Stock is purchased and a cheque butt (if cash is paid) or an invoice (if it is a credit transaction) or a cash register roll (records printed on the cash register roll) is received by the bookkeeper.
  2. A cash purchase is recorded in the cash payments journals and a credit purchase is recorded in the purchases journal.
  3. When the stock is sold the customer is given a receipt if cash was paid, or an invoice for a credit sale.
  4. When an item of stock is sold it is recorded in the cash receipts journal if it is sold for cash or the sales journal if it is sold on credit.
  5. The journals are periodically posted to the ledger.
  6. A physical stock-take is normally performed at or near the end of the accounting period.  This involves physically counting the stock on hand.  Entries are recorded in the general journal and posted to the ledger.
  7. On balance day the trading revenue and expense accounts are closed to the trading account.
  8. The balance of the trading account is transferred to the profit and loss account, as are all other revenue and expense accounts.
  9. The trial balance is completed.
  10. Final accounting reports are prepared.
  11. The merchandise account has a balance which starts the accounting period.

What Records Need to Be Kept in a Trading Business?


A trading business may have the following journals:

  • Cash receipts journal – for all cash receipts.

  • Cash payments journal – for all cash payments.

  • General journal – for transactions such as adjusting and closing entries, the purchase or sale of an asset on credit, the contribution by the owner of assets other than cash, or the opening entries for an accounting system.

  • Sales journal – for all credit sales.

  • Purchases journal – for all credit purchases of stock.

  • Sales returns and allowances journal – for all returns of stock from customers, refunds given by the business, or allowances given for damaged or incorrect stock.

  • Purchases returns and allowances journal – for all stock the business returns, or refunds given by the supplier in the form of credit notes.


Ledger Accounts

The process of posting from the journals to the ledger for a trading business is basically the same as for a service business. The only difference is that a trading business includes some additional accounts to record transactions such as the return of stock and to measure the cost of the goods sold.

  • The revenue and expense accounts used to record the purchase or sale of stock are closed to the trading account.  
  • The trading account is a summary account used to find the gross profit of the business. 
  • The gross profit is the excess of sales revenue over the cost of the goods sold.  
  • Accounts such as sales, purchases, returns, discounts and freight are all closed to the trading account.  
  • The trading account is then closed to the profit and loss account to find the net profit for the business. 


There are two main presentation alternatives when reporting profit results for a trading business:

1. An expanded profit report
2. Or a trading report and profit report.


If just a profit report is used, it is formatted in a different way for a trading business than for a service business.  This is because a profit report for a trading business gives greater focus to stock and shows the gross profit.  In the profit report the gross profit for a business is shown and operating expenses are subtracted from the gross profit to find the net profit. 
If a trading report and profit report are used, the information is divided up so that:

  • The trading report represents the items in the trading account
  • The profit report shows the effect of other expenses on the gross profit.  The net profit for the business can then be calculated.


Most businesses today will employ accountants, bookkeepers or other financial experts to manage their accounts. Modern businesses cannot survive without a fairly sophisticated understanding of bookkeeping, and unless the owners have the expertise and time to apply that expertise (and remain up to date with change); the options usually come town to either employing someone on staff who has bookkeeping expertise, or outsourcing the work.

Learning more about bookkeeping will always give you an advantage over those who know less.
Anyone who works in administration will become more valuable to their employer if they know and understand bookkeeping to a greater degree.  Anyone who has a higher level of knowledge will be able to offer clients a broader and deeper service; and for independent bookkeepers, this will enhance the potential of any bookkeeping service you are running.


What can this course do for you?

This course can:

  • Improve the job opportunities and career security for people who work in administration or finance
  • Expand the services that you can offer if you are already trained in, or working in bookkeeping
  • Help business owners in trading businesses (eg. retailing, wholesaling, manufacturing); better understand the management of their finances
  • Increase your "employability" in management and marketing sectors of business.


Visit the school's Online Bookshop

  • Printed books reviewed and selected by our staff to complement our courses.
  • E books; available to buy and immediately download to a computer or reader.
  • Lots of titles written by our academic staff