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In a trading firm, octroi paid on purchases is debited to:
ATrading Account directly
BProfit & Loss Account
CBalance Sheet asset side
DCapital reserve account
Answer & Solution
Correct answer: A. Trading Account directly
1. Octroi is paid to bring goods to firm's location.
2. It is a direct expense forming part of cost of goods purchased.
3. Hence debited to Trading Account.
_Source: ICAI BoS Foundation Paper 1, Ch 7 U1 "Final Accounts", §1.3 direct expenses_
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