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trial balance:
Revenue $300 000 Cr side (i)
Cost of sales $204 500 Dr sideNotes :
(i) – On October 2007 an item of plant was disposed of for $2.5 million cash . The proceeds have been treated as sales revenue by Candel . The plant is still included in the above trial balance figures at its cost of $8 million and accumulated depreciation of $4 million (to the date of disposal)
Why can not recognise Plant as part of the Revenue sales since the proceeds have been treated as sales revenue by Candel ? As we have to deduct from revenue on statement comprehensive income ( Revenue $300 000 – $2500) = $297 500.
Because ‘revenue’ represents the amounts received (or still to be received) from the sale of inventory (or provision of services)
Sale of plant is not a sale from inventory … unless your business is selling plant and, in that case, the plant that you sell would be classified as inventory!
In the revision lectures on the F7 page on this site you will find a video recording of me working through Candel. Have you watched that?
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