How is carriage outward normally treated in the financial statements of a sole trader?
Correct answer: C. As a selling and distribution expense
- A. As an addition to closing inventory
- B. As a deduction from sales revenue
- C. As a selling and distribution expense
- 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.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
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.
Practise Financial Statements of Sole Traders
34 free Financial Statements of Sole Traders MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Financial Statements of Sole Traders questions
Which statement best describes the purpose of the statement of changes in owner's capital for a sole trader?
A sole trader receives a cash discount from a supplier for prompt payment. In the financial statements, this discount is normally treated as:
A sole trader spends Rs. 120,000 extending the useful capacity of an existing machine. How is this expenditure normally classified?
A sole trader receives a bank loan of Rs. 200,000 directly into the business bank account. What is the immediate accounting effect?
A machine with a carrying amount of Rs. 40,000 is sold by a sole trader for Rs. 50,000. What is the result of the disposal?
A sole trader receives Rs. 30,000 from a customer who previously bought goods on credit. What is the effect on the financial statements?