Oliver has been in business as a retailer for one year. He is unsure about some of the terms used in business.

a. Explain the difference between the following terms and how they are recorded in an income statement:

i.  Gross profit and profit for the year
ii. Carriage inwards and carriage outwards
iii. Discount allowed and discount received
iv. Purchases returns and sales returns

Oliver provided the following totals for the year ended 31 December 20–5:
                                                                $
Rates ......................................        3,140
Office expenses ...................         1,170
Commissions received ...............  5,830
Sales returns ...............................  1,480

b. Enter these totals in the appropriate accounts. Close the accounts by making transfers to the income statement.