Carriage inwards is charged to the trading account because:

Carriage outwards goes in the profit and loss account

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It is an expense connected with buying goods

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It is not part of motor expenses

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It should not go in the balance sheet

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Solution

The correct option is B
It is an expense connected with buying goods

Carriage inwards is charged to the trading account because it is an expense connected with buying goods.

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The following is the Trial Balance of Mr. Deepak as on March 31, 2017. You are required to prepare trading account, profit and loss account and a balance sheet as on date:

Account title	Debit Amount Rs	Account title	Credit Amount Rs
Drawings	36,000	Capital	2,50,000
Insurance	3,000	Bills payable	3,600
General expenses	29,000	Creditors	50,000
Rent and taxes	14,400	Discount received	10,400
Lighting (factory)	2,800	Purchases return	8,000
Travelling expenses	7,400	Sales	4,40,000
Cash in hand	12,600
Bills receivable	5,000
Sundry debtors	1,04,000
Furniture	16,000
Plant and Machinery	1,80,000
Opening stock	40,000
Purchases	1,60,000
Sales return	6,000
Carriage inwards	7,200
Carriage outwards	1,600
Wages	84,000
Salaries	53,000

Closing stock Rs 35,000.

Prepare trading and profit and loss account and balance sheet from the following particulars as on March 31, 2017.

Account Title	Debit Amount Rs	Credit Amount Rs
Purchases and Sales	3,52,000	5,60,000
Return inwards and Return outwards	9,600	12,000
Carriage inwards	7,000
Carriage outwards	3,360
Fuel and power	24,800
Opening stock	57,600
Bad debts	9,950
Debtors and Creditors	1,31,200	48,000
Capital		3,48,000
Investment	32,000
Interest on investment		3,200
Loan		16,000
Repairs	2,400
General expenses	17,000
Wages and salaries	28,800
Land and buildings	2,88,000
Cash in hand	32,000
Miscellaneous receipts		160
Sales tax collected		8,350

Closing stock Rs 30,000.

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.

Q. Prepare Trading and Profit and Loss Account and Balance Sheet of Jagat Shah as at 31st March, 2018 from the following balances:

	₹		₹
Capital (Cr.)	3,60,000	Salaries	60,000
Machinery	70,000	General Expenses	20,000
Sales	8,20,000	Rent	50,000
Purchases	4,00,000	Purchases Return	5,000
Sales Return	10,000	Debtors	3,00,000
Stock on 1st April, 2017	1,00,000	Cash	40,000
Drawing	40,000	Carriage Outwards	20,000
Wages	1,00,000	Advertising	20,000
Carriage Inwards	5,000	Creditros	50,000

The Closing Stock was valued at ₹ 2,00,000.

From the following Statement of Profit and Loss for the year ended 31st March, 2019 of Rex Ltd., calculate Inventory Turnover Ratio:

STATEMENT OF PROFIT AND LOSS for the year ended 31st March, 2019
Particulars ulars	Note No.	Amount (₹)
I. Revenue from Operations (Net Sales)		6,00,000
II. Expenses:
(a) Purchases of Stock-in-Trade		3,00,000
(b) Change in Inventory of Stock-in-Trade	1	50,000
(c) Employees Benefit Expenses		60,000
(d) Other Expenses	2	45,000
Total ExpensesTotal Expenses		4,55,000
III. Profit before Tax (I-II)		1,45,000
IV. Less: Tax		45,000
V. Profit after Tax (III-IV)		1,00,000

Notes to Accounts

Particulars	Amount (₹)
I. Change in Inventory of stock-in-Trade
Opening Inventory	1,25,000
Less: Closing Inventory	75,000
	50,000
2. Other Expenses
Carriage Inwards	15,000
Miscellaneous Expenses	30,000
	45,000

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Carriage inwards is charged to the trading account because:

The correct option is B It is an expense connected with buying goods Carriage inwards is charged to the trading account because it is an expense connected with buying goods.

The correct option is B
It is an expense connected with buying goods

Carriage inwards is charged to the trading account because it is an expense connected with buying goods.