Skip to content

CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

In the final accounts of a sole proprietor prepared from a trial balance, 'Carriage inwards' appearing in the trial balance is most appropriately shown:

Carriage inwards is shown on the debit side of the Trading Account because it is a direct cost of bringing purchased goods to the business. It forms part of the cost of goods sold, unlike carriage outwards, which is a selling expense charged to Profit and Loss Account.

  1. AOn the debit side of the Trading AccountCorrect
  2. BOn the debit side of the Profit and Loss Account
  3. COn the credit side of the Trading Account
  4. DAs a deduction from capital in the Balance Sheet

Explanation

Carriage inwards is a direct expense incurred to bring goods to their place and condition for sale. It is therefore a part of the cost of goods sold and is debited in the Trading Account. Carriage outwards is the one that goes to the Profit and Loss Account.

Did you get it right without looking?

One question tells you little. A timed set on Preparation of Final Accounts for Sole Proprietorship shows your real accuracy, how long you take and where you lose marks.

Practise Preparation of Final Accounts for Sole ProprietorshipFree diagnostic mock

More Preparation of Final Accounts for Sole Proprietorship questions