Skip to content

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

Nair & Sons had the following receipts in a year: sale of goods Rs 9,00,000; loan from a bank Rs 2,00,000; sale of old machinery (book value Rs 70,000) for Rs 60,000; interest on investments Rs 12,000; rent from sub-letting a part of the shop Rs 24,000. What are the total revenue receipts and the amount credited or debited to profit and loss for the machinery sale?

Revenue receipts are Rs 9,36,000, being sales, interest and rent (9,00,000 + 12,000 + 24,000). The bank loan and machinery proceeds are capital receipts. The machinery sold below book value produces a loss of Rs 10,000, which is debited to the profit and loss account.

  1. ARevenue receipts Rs 9,36,000; loss on machinery Rs 10,000 debited to profit and lossCorrect
  2. BRevenue receipts Rs 9,36,000; machinery proceeds Rs 60,000 credited to profit and loss
  3. CRevenue receipts Rs 11,36,000; loss on machinery Rs 10,000 debited to profit and loss
  4. DRevenue receipts Rs 9,96,000; loss on machinery Rs 10,000 debited to profit and loss

Explanation

Revenue receipts = 9,00,000 + 12,000 + 24,000 = Rs 9,36,000. The loan (Rs 2,00,000) and machinery proceeds (Rs 60,000) are capital receipts. Loss on sale = 70,000 - 60,000 = Rs 10,000, debited to profit and loss. Adding the loan gives option C, and adding machinery proceeds gives option D.

Did you get it right without looking?

One question tells you little. A timed set on Capital and Revenue Transactions shows your real accuracy, how long you take and where you lose marks.

Practise Capital and Revenue TransactionsFree diagnostic mock

More Capital and Revenue Transactions questions