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CSEET · Fundamentals of Accounting · Accounting for Non-Profit Organizations

A club's Receipts and Payments Account shows the sale proceeds of old sports equipment (book value ₹12,000) as ₹9,000. How should this be treated while preparing final accounts?

The asset is removed from the Balance Sheet at its book value of 12,000, and the shortfall of 3,000 against the 9,000 proceeds is shown as a loss on sale in the Income and Expenditure Account. The proceeds themselves are capital receipts, not income.

  1. ACredit ₹9,000 to Income and Expenditure Account as income
  2. BShow ₹9,000 as a reduction of expenses
  3. CRemove the asset at ₹12,000 and show the ₹3,000 loss in Income and Expenditure AccountCorrect
  4. DAdd ₹9,000 to the Capital Fund

Explanation

Sale proceeds are a capital receipt and are not income. The asset is removed at its book value of 12,000 from the Balance Sheet, and the difference of 3,000 between book value and proceeds is a loss on sale charged to the Income and Expenditure Account.

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