I have answered this question on the assumption that "Trading Expenses are those expenses which are covered in the Trading Account". Meaning of Trading Expenses Trading Expenses are direct expenses incurred for the purchase and production of goods. They are related to the core business operations ofRead more
I have answered this question on the assumption that “Trading Expenses are those expenses which are covered in the Trading Account”.
Meaning of Trading Expenses
Trading Expenses are direct expenses incurred for the purchase and production of goods. They are related to the core business operations of the business entity and directly related to the purchase and production of the finished goods.
So, all the expenses incurred from the time of purchasing raw materials/goods till the time the finished goods are brought to a saleable condition are referred to as trading expenses.
Eg. carriage inward, manufacturing expenses, wages, etc.
Presentation in Financial Statements
Particulars | Financial Statement | Treatment/Presentation |
Trading Expenses (Direct Expenses) | Trading Account | Presented on the Debit side of Trading Account |
A snippet of the Trading account has been attached for better understanding.
Meaning of Provision for Discount on Debtors In order to receive early payment from the debtors in the succeeding period, entities provide incentives to the debtors who are ready to pay the outstanding amount before their credit period ends. So, at the end of every period, entities will have to estiRead more
Meaning of Provision for Discount on Debtors
In order to receive early payment from the debtors in the succeeding period, entities provide incentives to the debtors who are ready to pay the outstanding amount before their credit period ends.
So, at the end of every period, entities will have to estimate the amount of discount which may be availed by the debtors in the succeeding period. This estimate will be based on past experience. Accordingly, provision will have to be created in the current period as the amount of discount is an expected loss for the entity. This provision is referred to as “Provision for Discount on Debtors”.
Journal Entry for Provision for Discount on Debtors
Treatment of Provision for Discount on Debtors in Final Accounts
Extract of Profit & Loss account and Balance Sheet have been attached for better understanding.

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