The incorrect answer is Carriage outwards is recorded on the credit side of the Profit and Loss Account. Important PointsAll the income and gains are the sources of revenue for the business and are noted on the credit side of the Profit & Loss Account being nominal accounts except sales which are noted on the credit side of the Trading account. So, option 1 is contextually correct. Only the losses or revenue expenses incurred in the current year are debited to the Profit & Loss Account. All the expenses paid in advance for the next year in the current year are deducted from the respective expenses. So option 2 is also contextually correct. Profit and loss account is prepared in continuation of Trading account. Since the balance of the Trading account denotes Gross Profit or Gross Loss, the Profit and Loss Account starts with gross profit on the credit side or gross loss on the debit side, Therefore, Option 4 is also contextually correct. Carriage outward refers to the fees of shipping and handling that a business incurs when transporting products to a customer. Since all expenses are considered nominal accounts, these are debited. Carriage outwards is not paid in the process of manufacturing of goods, so these are selling and distribution cost and therefore are debited to the Profit and Loss account. Hence, Option 3 is incorrect. Additional Information Profit & Loss Account: This is an account in a company's books to which gains and income are credited and expenses and losses are debited to reflect the net profit or loss for a certain period.