Question

freight and octroi - trading account or profit and loss account and why?

Answer 1

Here the freight and octroi inwards comes in trading account as it is an direct expense because it is incurred to bring the good to the godown whereas freight outwards come in purchase and buy account as it is an indirect expense.

Answer 2

Answer:

Trading account

Explanation:

In the trading account, the direct income and direct expenses are recorded whereas in profit and loss account, indirect expenses and indirect income are recorded.

The trading account gives gross profit or gross loss whereas profit and loss account gives net profit or net loss.

The direct expense is that expense which are used to produce a final product or manufacturing a product.

In the given case, the freight and octroi is a direct expense which should be recorded in the trading account as the tax is levied when the goods are entered in the country. Moreover, it also records sales, purchase, opening, closing stock