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CMA Foundation · Fundamentals of Financial and Cost Accounting · Capital and Revenue Transactions

Gupta Stores, a retailer of electronics, sold goods costing Rs 3,00,000 for Rs 3,60,000. In the same year it sold an old plot of land, which cost Rs 5,00,000, for Rs 6,20,000, and it incurred a fire loss of Rs 15,000 on damaged stock. Taking only items that are revenue in nature, what is the revenue profit from these transactions?

Revenue profit is Rs 45,000. The trading profit of Rs 60,000 on the goods is reduced by the Rs 15,000 loss on stock destroyed by fire, which is a revenue loss. The Rs 1,20,000 gain on land is a capital profit and is left out.

  1. ARs 45,000Correct
  2. BRs 60,000
  3. CRs 1,65,000
  4. DRs 1,80,000

Explanation

Gross profit on goods is 3,60,000 - 3,00,000 = Rs 60,000, which is revenue profit. The loss on stock by fire is a revenue loss of Rs 15,000, so the net is 60,000 - 15,000 = Rs 45,000. The land gain of Rs 1,20,000 is a capital profit and is excluded. Rs 60,000 ignores the stock loss.

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