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From trial balance to financial statements

Closing off accounts

At the year-end, the ledger accounts must be closed off in preparation for the
recording of transactions in the next accounting period. As demonstrated this is
either done by transferring the existing balance to the statement of profit or loss or by
calculating the opening balance on the asset/liability/capital account.

4.1 Accounting for carriage costs

Business entities may pay for carriage and delivery charges on items that they buy
and/or sell. Such charges are normally accounted for as an expense in the statement
of profit or loss, subject to the following points:

 Any carriage costs incurred on the delivery of non-current assets purchased for
use by the entity are regarded as part of the cost of sales of the asset and
added to the cost of the asset, rather than charged as an expense.

 Any carriage costs inwards on the purchase of goods for resale or materials
used for manufacturing are part of cost of sales and accounted for in arriving at
gross profit.

 Any carriage costs outwards incurred on delivery of goods to customers are
accounted for as an expense after gross profit has been calculated.

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