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wht is the difference between sales nd revenue ?
why have plant proceed minus from revenue ?What are you talking about here. specify the question number, year, from which book, etc??????
Revenue is income. Most income comes from sales. But if you’re a service company, your revenue is from services provided. If you’re a leasing company, your revenue is from lease interest received. So sales are revenue, but revenue isn’t necessarily sales. ( All elephants are animals, but not all animals are elephants! )
Point number 1 in the notes after the Harrington figures says “Included in sales revenue ….” Proceeds of disposal of TNCA are not “sales”. The net profit or loss on disposal will be shown ( the balancing figure from the “Disposals Account” )
I understand why the entire sales proceeds of 300 is deducted from sales but why is the profit on disposal deducted from the cost of sales figure?
this is in the harrington question in the BPP Revision Kit.nicky, the company has Dr Cash and Cr Revenue. We need to “undo” that entry so Dr Revenue and Cr Cash. OK, now we can do the correct entries:
Dr Disposal a/c 900 Cr TNCA Cost a/c 900
Dr Accum Depn 630 Cr Disposal a/c 630
DR Cash 300 Cr Disposal a/c 300
That leaves a balance on Disposal a/c of 30 and it’s a profit.
Can you accept that a profit ( or loss ) on disposal of an asset is, in effect, an over- ( or under- ) provision for depreciation in prior years?
And if depreciation is charged to Cost of Sales a/c, then surely a gain on disposal of an asset should be used to reduce the cost of sales ( a loss would increase the cost of sales ).
And that’s what BPP have done
Dr Disposal a/c 30 Credit Cost of Sales 30hi sir..
i didnt understand the depreciation part of this question .
How did they arrive at 450 depreciation in the current year .. ?Also can you please give me a clear idea about what to do when revaluation and depreciation comes.. i guess that is the principle applied here.. if i am wrong pardon me. but can u give me a simple example to understand this ?
“Can you accept that a profit ( or loss ) on disposal of an asset is, in effect, an over- ( or under- ) provision for depreciation in prior years? ” An example for this too…
sorry for asking too many questions. But i need simple examples to understand the concepts.
thanks in advance.
Hi Anu
450 is 25% calculated on the reducing balance basis. The appropriate figure is 4,300 cost ( ie 5,200 per question less 900 cost of disposal ) less 2,500 ( ie 3,130 per question less 630 depreciation on the disposed asset ). So 25% x ( 4,300 – 2,500 ) is 25% x 1,800 = 450
Hope that helps
sir i need clarification on the figure of finance cost to be included in the consolidated income statment. ?
only parents figure is included or what ?
what are the adjustments to be made on finance costWhich question? Generally, the consolidated finance charge is the parent’s + the time apportioned post acquisition charge of the subsidiary – any finance / loan interest paid WITHIN the group ( so need to cancel finance expense against finance income where it relates to an intra-group loan )
I am still confused ” with
@mikelittle said:
nicky, the company has Dr Cash and Cr Revenue. We need to “undo” that entry so Dr Revenue and Cr Cash. OK, now we can do the correct entries:
Dr Disposal a/c 900 Cr TNCA Cost a/c 900
Dr Accum Depn 630 Cr Disposal a/c 630
DR Cash 300 Cr Disposal a/c 300
That leaves a balance on Disposal a/c of 30 and it’s a profit.
Can you accept that a profit ( or loss ) on disposal of an asset is, in effect, an over- ( or under- ) provision for depreciation in prior years?
And if depreciation is charged to Cost of Sales a/c, then surely a gain on disposal of an asset should be used to reduce the cost of sales ( a loss would increase the cost of sales ).
And that’s what BPP have done
Dr Disposal a/c 30 Credit Cost of Sales 30“
could you pls explain further cause i thought the cash should be adjusted given that the wrong entry was recorded before. Thanks a lot !
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