Gains realized from disposing of vintage plant equipment are:___________?
Show answer Hide answer
Answer: C. Profit and Loss A/c
Explanation
Gains realized from disposing of vintage plant equipment are credited to the Profit and Loss Account. Disposal gains represent non-operating income recognized during fixed asset retirement. The Profit and Loss Account absorbs all incidental gains and losses from asset sales. Plant equipment disposal generates a gain if the selling price exceeds book value. Book value equals historical acquisition cost minus accumulated depreciation expenses. These capital gains are distinct from regular operational sales revenue streams.
Corporate financial reports separate operating profits from incidental asset disposal gains. Management evaluates equipment replacement strategies by analyzing potential disposal gains. Accurate profit reporting ensures stakeholders understand the true sources of net income. Trading accounts are strictly limited to direct merchandise sales and cost of goods sold. Profit and Loss Appropriation accounts distribute net profits rather than recording asset gains. Ignoring non-operating disposal items would violate comprehensive income reporting rules.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
Related questions
Q1. Merchandise returned by purchasers is designated as:
Show answer Hide answer
Answer: C. Sales return
Goods that were previously sold to customers and subsequently returned are officially recorded as sales returns. This transaction reduces the gross revenue of the business and restores returned items to inventory if usab...
Q2. Maintaining a log of financial transactions in books of primary entry is called__________?
Show answer Hide answer
Answer: A. Recording
The initial logging of financial transactions into books of primary entry is universally referred to as recording. This foundational step captures raw transactional data from source documents like invoices and receipts....
Q3. The transaction "Sale of old furniture" belongs in which specialized journal?
Show answer Hide answer
Answer: C. General journal
The sale of old furniture is a non-routine transaction logged in the general journal. Specialized journals only capture routine recurring transactions like inventory sales. Disposal of fixed assets requires a journal ent...
Q4. For which phase of the accounting cycle do corporate accountants compile financial statements?
Show answer Hide answer
Answer: B. Communication of financial information
Compiling financial statements is the phase of the accounting cycle focused on communicating financial information. It presents summarized accounting data clearly to internal managers and external stakeholders for decisi...
Q5. Riaz maintains average inventory at 36,000 (CP) with an inventory turnover rate of 5. If the gross profit margin is 25% of sales, determine the company's aggregate sales.
Show answer Hide answer
Answer: A. 2,40,000
With an inventory of 36000 and turnover of 5 cost of goods sold is 180000. Given a 25 percent gross profit margin on sales aggregate sales equal 240000. Calculating cost of goods sold and applying the margin formula yiel...
Q6. Credit sales are documented in which of the following journals?
Show answer Hide answer
Answer: B. Sales journal
All sales of goods on credit terms are systematically recorded in the specialized sales journal. This eliminates the need to write separate general journal entries for every routine credit customer transaction. Cash sale...