Read the following information provided by a school and attempt Question:
The Trial Balance of a school as on 31.3.2017 is
|
Debit Balance |
Amount (₹) |
Credit Balance |
Amount (₹) |
|
Building |
6,25,000 |
Admission fees |
12,500 |
|
Furniture |
50,000 |
Tuition fees received |
5,00,000 |
|
Library books |
1,50,000 |
Creditors for supplies |
15,000 |
|
Investment @12% (1.4.16) |
5,00,000 |
Rent for the school hall |
10,000 |
|
Salaries |
5,00,000 |
Miscellaneous receipts |
30,000 |
|
Stationery |
40,000 |
Legacies (general) |
3,50,000 |
|
General expenses |
18,000 |
General fund |
10,00,000 |
|
Sports expenses |
15,000 |
Donation for library books |
62,500 |
|
Cash at bank |
1,00,000 |
Sale of old furniture |
20,000 |
|
Cash in hand |
2,000 |
|
|
|
|
20,00,000 |
|
20,00,000 |
Additional Information:
The book value of the furniture sold was ₹50,000 on April 1, 2016 was sold for ₹20,000.
Furniture of Book value ₹50,000 was sold for ₹20,000. Loss on Sale of Furniture of ₹30,000 will be _____.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Debited to Income and Expenditure A/c.
Furniture of Book value ₹50,000 was sold for ₹20,000. Loss on Sale of Furniture of ₹30,000 will be Debited to Income and Expenditure A/c.
When an asset such as furniture is sold for less than its book value, the difference is recognized as a loss. In this case, the furniture's book value is ₹50,000, and it is sold for ₹20,000, resulting in a loss of ₹30,000. This loss needs to be debited to the Income and Expenditure Account, as it represents a reduction in the value of assets that impacts the overall financial performance.