FINAL ACCOUNTS OF SOLE PROPRIETORS - I

Items shown on the debit side of profit and loss account are as follows: (i) Gross loss If trading account discloses gross loss, it is shown on the debit side of the profit and loss account. (ii) Indirect expenses Expenses which are not connected with purchase of goods are indirect expenses, i.e., expenses incurred in administration, office, selling and distribution of goods are indirect expenses. (a) Office and administrative expenses Expenses incurred for office and administration such as salary of office employees, office rent, lighting, postage, printing, legal charges, audit fee, depreciation and maintenance of office equipment, etc. are classified as office and administrative expenses.

(b) Selling and distribution expenses Expenses incurred for selling, promotion of sales and distribution of goods such as advertisement charges, commission to salesmen, carriage outwards, bad debts, godown rent, packing charges, etc., are classified as selling and distribution expenses. (c) Other indirect expenses and losses The expenses such as interest on loan, repair charges, depreciation, charity, loss on sale of fixed assets and abnormal losses such as loss due to fire, theft, etc. not covered by insurance are shown under this category.