Question

Payment of donation is .............. .

• A. debited to Costing Profit and Loss Account
• B. credited to Costing Profit and Loss Account
• C. debited to Financial Profit and Loss Account
• D. credited to Financial Profit and Loss Account

Hint:

Non-production expenses like donations belong only in financial accounts.

Answer 1

The Correct Option is C

Donations are distinct from the production of goods or services. They represent financial outlays solely for charitable, social, or promotional aims. Consequently, donations are excluded from the Costing Profit and Loss Account as they do not influence cost control or calculation. Instead, they are recorded as a non-operating expense on the Financial Profit and Loss Account. This practice maintains the integrity of cost data, ensuring it exclusively reflects production-related expenditures. Therefore, donations are correctly debited to the Financial Profit and Loss Account.