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CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of Sole Proprietorship

In the final accounts of a sole proprietor, which of the following items is shown on the debit side of the Profit and Loss Account?

Carriage outwards is shown on the debit side of the Profit and Loss Account because it is a selling and distribution expense. Discount received, interest on deposits and commission earned are incomes, so they are credited. Carriage inwards would instead be charged in the Trading Account.

  1. ADiscount received
  2. BInterest on bank deposits received
  3. CCarriage outwardsCorrect
  4. DCommission earned

Explanation

Carriage outwards is a selling and distribution expense, so it is debited to the Profit and Loss Account. Discount received, interest received and commission earned are incomes and appear on the credit side. Carriage inwards, by contrast, goes to the Trading Account.

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