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HI My dear Tutor, I have question.
If a company has P/P/E and if the company sells it say for example sales proceed 2500-carrying value 4000=loss on disposal 1500this part in understandable because it is loss.
Debit Administrative expense or cost of sales-1500
credit cash-1500But why we do not add sales proceed over sales revenue?or why we have to deduct it from sales revenue?In the example of Candel, it says the plant disposed of 2500 and included sales revenue.But when i prepared p/l statement and i got incorrect profit for the year.
Could you explain it please?
Thanks in advance
“this part in understandable because it is loss.
Debit Administrative expense or cost of sales-1500
credit cash-1500”NO, NO, NO!
Dr Cost of Sales (ok) $1,500
Cr Disposals Account (NOT the Cash account) $1,500“But why we do not add sales proceed over sales revenue?or why we have to deduct it from sales revenue?In the example of Candel, it says the plant disposed of 2500 and included sales revenue.But when i prepared p/l statement and i got incorrect profit for the year”
This is F3 stuff and you really MUST spend the next 3 days going over John’s F3 notes and lectures. Seriously, this is basic stuff!
The only reason that the sale proceeds are deducted from Candel’s revenue is because they shouldn’t have been included there in the first place
The whole exercise of disposing of an asset and accounting for its profit or loss on disposal is dealt with through a Disposals Account
Watch John’s lectures!
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