CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship
Which of the following items would appear on the debit side of the Profit and Loss Account of a sole proprietor, rather than in the Trading Account?
Office rent is an indirect expense, so it is debited in the Profit and Loss Account. Purchases, carriage inwards and wages on goods are direct items connected with goods for sale, and they are charged in the Trading Account.
- AOffice rentCorrect
- BCarriage inwards
- CWages on goods manufactured
- DPurchases
Explanation
Office rent is an indirect expense and is debited to the Profit and Loss Account. Carriage inwards, productive wages and purchases are direct costs relating to getting goods ready for sale and so belong to the Trading Account.
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