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A second hand car is purchased for 2,00,000 and sold at 1,40,000 after two years. If depreciation is charged @ 10% on SLM method, find the profit or loss on sale of the car?

Correct answer: A. 20,000 Loss

  • A. 20,000 Loss
  • B. 20,000 Profit
  • C. 10,000 Loss
  • D. 10,000 Profit

Explanation

Under SLM, annual depreciation is 10% of 200,000, or 20,000; two years reduce the book value to 160,000. Sale at 140,000 gives a loss of 20,000.

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Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.

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