What is the trading account?

The operating account is an accounting concept that refers to the total profits or losses obtained by a company, taking into account the income and expenses that it has caused by its normal activity for the period in question.

Structure of the operating account

In the operating account there are two large blocks that allow obtaining the result. Notably, it is made up of a difference between operating income and operating expenses.

Operating income

They refer to everything that the company receives for the activity it carries out. Usually it usually refers to the sales of the products or services you offer. Although those assets that have been purchased and that after their revaluation reach higher levels than those for which they were acquired can also be included.

Operating expenses

It is what the company has to invest in in order to carry out its social commitment. These expenses can include:

  • Purchases. Can be of materials or of finished products that will later be sold to final consumers.
  • External services to the company. Electricity, gas, telephone, advertising, bank charges, etc ... and everything related to services that the company itself does not provide.
  • Personal expenses. It refers to both salaries, such as compensation, social security expenses, etc ...
  • Amortization. The "fictitious" loss of the intangible of the company (such as machinery) due to its daily use and that is usually included as business expense.
  • Impairment losses on fixed assets. Once the appropriate amortizations have been made, this asset is revalued to give it the value it deserves (it is usually done at the end of the financial year).
  • Stock variation. If the variation in inventory stocks with respect to the first of year is lower, we will have to make an adjustment to the number of purchases (having spent more than actual consumption).
  • Tributes It can be direct (Corporation tax) and indirect (VAT, IBI, ...)

Once all these concepts are taken into account, those corresponding to income on the one hand and operating expenses on the other will be added. When this operation has been carried out, the operating income must be subtracted from the operating expense to finally obtain the operating income. This concept is also known asEBITDA(Earnings Before Interest, Taxes, Depreciation, and Amortization), which does not include interest or corporate tax.

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