Carriage on purchases and carriage on sales are taken to which accounts respectively?
ATrading account, and profit and loss account
BProfit and loss account, and trading account
CBoth of them go to the trading account
DBoth of them go to profit and loss account
Answer & Solution
Correct answer: A. Trading account, and profit and loss account
1. The split follows whether the cost was incurred to bring goods in or to send goods out.
2. Carriage on purchases, also called carriage inwards, is a cost of acquiring the goods, so it is debited to the trading account.
3. Carriage on sales, also called carriage outwards, is a cost of distribution, so it is debited to the profit and loss account.
4. In the textbook's illustration, carriage on purchases of Rs 3,000 appears in the trading account while carriage on sales of Rs 700 appears in the profit and loss account.
5. Putting both in one account would misstate the gross profit.
_Source: TN HSC Class 12 Accountancy (Samacheer Kalvi, Govt of Tamil Nadu), Unit 1 "Accounts from Incomplete Records", Illustration 20_
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