Financial Statements - I

from the previous year and remains unchanged during the year and appears in the trial balance. In the trading account it appears on the debit side because it forms the part of cost of goods sold for the current accounting year. (ii) Purchases less returns : Goods, which have been bought for resale appears as purchases on the debit side of the trading account. They include both cash as well as credit purchases.

Goods which are returned to suppliers are termed as purchases return. It is shown by way of deduction from purchases and the computed amount is known as Net purchases . (iii) Wages : Wages refer to renumeration paid to workers who are directly engaged in factory for loading, unloading and production of goods and are debited to trading account. (iv) Carriage inwards/Freight inwards: These expenses are the items of transport expenses, which are incurred on bringing materials/goods purchased to the place of business.

These items are paid in respect of purchases made during the year and are debited to the trading account. (v) Fuel/Water/Power/Gas : These items are used in the production process and hence are part of expenses. (vi) Packaging material and Packing charges : Cost of packaging material