BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Profit and loss
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Furniture
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Depriciation
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Trading
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Detailed explanation-1: -Though it is not a business activity but due to usage of assets, the value gets depreciated. Depreciation is charged to profit & loss account. Same way, any loss arising on account of sale of old furniture should be debited to profit & loss account.
Detailed explanation-2: -Loss on sale of furniture is an indirect expense/loss to the firm, accordingly this has to be debited to Profit & Loss Account. Below is the journal entry passed for such case: Profit & Loss A/c Dr. ( with the amount of loss) Cash/Bank A/c Dr. (
Detailed explanation-3: -The loss on sale of an asset is debited to Profit & Loss account.
Detailed explanation-4: -The general expenses (purchase or raw material, expenditure on salary, trading goods, etc) are debited to Profit and Loss a/c but are also disallowed while computing income from Business only if the amount exceeds Rs.
Detailed explanation-5: -the profit or loss on sale or disposal of the asset is transferred to the Profit & Loss A/c.