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

In the Trading Account of a sole proprietor, which of the following items is shown on the debit side?

Carriage inwards is debited in the Trading Account because it is a direct expense incurred in bringing purchased goods to the business. Carriage outwards and discount allowed are indirect expenses and are charged in the Profit and Loss Account, not in the Trading Account.

  1. ACarriage outwards
  2. BCarriage inwardsCorrect
  3. CSales returns shown as addition to sales
  4. DDiscount allowed

Explanation

Carriage inwards is a direct expense incurred to bring goods to the place of business, so it is debited in the Trading Account. Carriage outwards is a selling and distribution expense and goes to the Profit and Loss Account. Discount allowed is also a Profit and Loss item.

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