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I am trying to understand tx signing in a simplest form. I am running a local node.

  1. Creating wallet is mandetory to store the keys?
  2. Wallet is must to create an account?

Transaction Signing

  1. Is there any way using cleos/rest api to sign a transaction by passing private key? I mean i do not want to use keosd/wallet to sign my transaction offline

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tx signing:

  1. Yes. You must use keosd.
  2. Yes.

So I can better understand your approach, what are you trying to do? I cannot envision a scenario in which you wouldn't want to use keosd unless you're using eosjs in which case you could store and sign with keys in a .env file.

  1. keosd is what is used natively to sign the transactions in the request and response process to produce a transaction.

See the tutorial: https://developers.eos.io/eosio-home/docs/wallets

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