Skip to content

ACCA Applied Knowledge · Financial Accounting · General ledger accounts and journal entries

Caldwell Ltd sold a van for $9,000 cash. The van cost $20,000 and accumulated depreciation was $12,500. Which statement about the ledger entries is correct?

The van's carrying amount is $7,500 (cost $20,000 less accumulated depreciation $12,500). Sale proceeds of $9,000 exceed this, so there is a $1,500 profit on disposal, credited to the statement of profit or loss.

  1. AProfit on disposal of $1,500 is credited to the statement of profit or lossCorrect
  2. BLoss on disposal of $1,500 is debited to the statement of profit or loss
  3. CProfit on disposal of $9,000 is credited to the statement of profit or loss
  4. DLoss on disposal of $11,000 is debited to the statement of profit or loss

Explanation

Carrying amount = 20,000 - 12,500 = $7,500. Proceeds $9,000 exceed this, giving a profit of $1,500, credited to profit or loss. A loss would arise only if proceeds were below $7,500. The sale proceeds themselves are not profit.

Did you get it right without looking?

One question tells you little. A timed set on General ledger accounts and journal entries shows your real accuracy, how long you take and where you lose marks.

Practise General ledger accounts and journal entriesFree diagnostic mock

More General ledger accounts and journal entries questions