CMA Foundation · Fundamentals of Financial and Cost Accounting · Capital and Revenue Transactions
Iyer Brothers, a stationery dealer, bought goods costing Rs 80,000 and sold them for Rs 96,000. It also sold a shop premises for Rs 12,00,000 that stood in its books at Rs 9,50,000. What is the revenue profit on these transactions, ignoring other expenses?
The revenue profit is Rs 16,000, the gain on trading goods (96,000 less 80,000). The Rs 2,50,000 gain on selling the shop premises is a capital profit, since it comes from disposing of a fixed asset, and is excluded from revenue profit.
- ARs 16,000Correct
- BRs 2,66,000
- CRs 2,50,000
- DRs 18,000
Explanation
Revenue profit arises from trading goods: 96,000 - 80,000 = 16,000. The gain on premises (12,00,000 - 9,50,000 = 2,50,000) is capital profit. Rs 2,66,000 wrongly adds the two.
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