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CA Foundation · Accounting · Final Accounts of Sole Proprietors

In the Profit and Loss Account of a sole proprietor, which of the following is shown on the credit side as an item of income?

Interest received on investments is an income and is credited in the Profit and Loss Account. Discount allowed, carriage outwards and bad debts written off are expenses or losses, so they are debited and reduce the net profit of the sole proprietor.

  1. ADiscount allowed to customers
  2. BInterest received on investmentsCorrect
  3. CCarriage outwards
  4. DBad debts written off

Explanation

Interest received on investments is a revenue gain and is credited to the Profit and Loss Account. Discount allowed, carriage outwards and bad debts are all expenses or losses and appear on the debit side.

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