BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Credited to the Trading Account
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debited to the Trading account
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credited to the Profit and Loss account
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debited to the Profit and Loss Account
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Detailed explanation-1: -Carriage inwards is charged to the trading account because it is an expense connected with buying goods.
Detailed explanation-2: -Carriage outwards is the seller’s expense to transfer the goods to the customer. It is selling expense and therefore an indirect expense. Hence, carriage outwards appearing the trial balance will appear on the debit side of P & L A/c.
Detailed explanation-3: -Trading account includes all the expenses related to production. All the indirect expenses comes in profit and loss account. That’s why carriage outward appears in profit and loss account and carriage inward appears in trading account.
Detailed explanation-4: -The carriage inward in trading accounts is accounted for in the books of accounts of the buyer, while the carriage outwards is accounted for in the books of the accounts of the seller. The carriage inward in the trading account is debited, while the carriage outwards is debited to the profit and loss account.
Detailed explanation-5: -Wages and salaries are direct expense which need to be debited to Trading account.