A non-current asset has a carrying amount of Rs. 180,000 and is sold for Rs. 150,000. What is the accounting result on disposal?
Correct answer: A. A loss of Rs. 30,000
- A. A loss of Rs. 30,000
- B. A gain of Rs. 30,000
- C. A gain of Rs. 150,000
- D. No gain or loss
Explanation
The loss or gain is measured by comparing sale proceeds with carrying amount. Since Rs. 150,000 is Rs. 30,000 below Rs. 180,000, the business recognises a loss of Rs. 30,000 in profit or loss. The sale proceeds themselves are shown as an investing cash inflow.
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Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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