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CA Foundation · Accounting · Final Accounts of Sole Proprietors

In the Trading Account of a trading firm, which one of the following items is shown on the debit side?

Carriage inwards is debited in the Trading Account because it is a direct cost of bringing purchased goods to the business premises. Carriage outwards and discount allowed are indirect expenses and are charged in the Profit and Loss Account instead.

  1. ACarriage inwardsCorrect
  2. BSales returns shown on the credit side
  3. CDiscount allowed to customers
  4. DCarriage outwards

Explanation

Carriage inwards is a direct expense incurred to bring goods to the place of business, so it is debited to 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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