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Financial Statements - 1 — Account STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceAccountFinancial Statements - 14 Marks
Question
What are Direct Expenses? Give two examples.
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Answer

Direct Expenses: Direct Expenses are the expenses incurred on the goods purchased, till they are brought to the place of business. Examples of such expenses are freight inwards, insurance, customs (import) duty, clearing charges, cartage, loading and unloading charges, etc. In a manufacturing concern, besides the above, expenses incurred for purposes of production such as wages, power and fuel, factory rent, etc., are also Direct Expenses.
Examples:
  1. Carriage or Freight or Cartage Inwards: It is the cost of bringing materials to the firm's godown. If any freight or carriage is paid on any asset, like machinery, it is added to the cost of the asset and is not debited to Trading Account.
  2. Wages: Wages paid to workers in the factory, including stores, are debited to the Trading Account; if any amount is outstanding it is accounted for so that the total wages for the period are debited to Trading Account.

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