On 1st April 2020, the balance of furniture of ABC Ltd. was Rs. 20,000. During the year furniture costing Rs. 4,000 was sold at a gain of Rs. 3,000. Depreciation was charged on it Rs. 5,000. The balance of furniture on 31.3.21 was Rs. 28,000. The amount of furniture purchased was :
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 17,000
The purchase is the missing figure in the Furniture Account. The account starts with the opening balance. The value of furniture sold and the depreciation reduce it. Purchases increase it, and the closing balance is what remains.
Opening balance = Rs. 20,000
Less: Furniture sold = Rs. 4,000
Less: Depreciation = Rs. 5,000
Add: Purchases = ?
Closing balance = Rs. 28,000
Purchases = Rs. 28,000 − Rs. 20,000 + Rs. 4,000 + Rs. 5,000 = Rs. 17,000
The gain of Rs. 3,000 on the sale goes to the Statement of Profit and Loss. It does not enter the Furniture Account, which is reduced only by the Rs. 4,000 value of the furniture sold.