All direct & indirect expenses related to business are charged to the ____________.

Profit and loss account

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Trading account

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Trading account and profit & loss account

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Directly to balance sheet

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Solution

The correct option is C Trading account and profit & loss account
Trading and Profit & loss account is prepared by the organization to know the gross profit and net profit.
Direct expenses are directly associated with the production/trading activity and to be charged to the trading account to know the gross profit.
Indirect expenses that are not directly associated but related to the business are to be charged to the profit & loss account to know the net profit.

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Similar questions

State whether the following statement are true or false.

1. Final Accounts are prepared on the basis of Trial Balance.
2. Trading Account is a part of Profit & Loss Account.
3. Profit Loss Account is prepared to find out Gross Profit or Gross Loss.
4. Gross Profit or Gross Loss is transferred to Balance Sheet.
5. An amount of net profit is added to the capital.
6. All indirect expenses are debited to trading account.
7. Balance Sheet is a statement and not an account.
8. Capital account is a personal account.
9. Amount of prepaid expenses appears on assets side.
10. Bank Overdraft is a liability of business concern.

A Statement of Affairs is similar to the :

(a) Balance sheet
(b) Trial balance
(c) Trading Account
(d) Profit & Loss Account

Q. "Income and Expenditure Account of a Not-for-profit Organisation is similar to Profit and Loss Account of a business concern". Explain the statement.

Q. Steps of preparing Final Accounts is -
(a) Trading Account
(b) Profit and Loss Account
(c) Balance Sheet

'Is it possible to prepare the profit and loss account and the balance sheet from the incomplete books of accounts kept by a trader'? Do you agree? Explain.

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