How is carriage outward normally treated in the financial statements of a sole trader?
Correct answer: A. As a selling and distribution expense
- A. As a selling and distribution expense
- B. As a deduction from sales revenue
- C. As an addition to closing inventory
- D. As a non-current business asset
Explanation
Carriage outward is the cost of delivering goods to customers, so it is normally included among selling and distribution expenses. It differs from carriage inward, which forms part of the cost of bringing inventory into the business.
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About Financial Statements of Sole Traders
Sole trader statements calculate revenue, cost of sales, gross profit, operating expenses and net profit, then present assets, liabilities and owner’s capital in the statement of financial position. Adjustments for closing inventory, accruals, prepayments, depreciation, bad debts, drawings and additional capital connect the two statements.
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