Discussion
Which of the following is not recorded in profit and loss account
Answer: B
Direct expenses are not recorded in the profit and loss account; they are charged in the trading account because they are incurred in bringing goods to a saleable condition or in making them (wages, freight, carriage inward and the like). Carriage outward is a selling and distribution expense, audit fees are an administrative expense and profit on sale of assets is a non-trading gain, so these three are items of the profit and loss account. That leaves direct expenses as the item that belongs to the trading account.
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