Capital receipt and profit involved should be transferred to capital reserve
Revenue receipt
Capital receipt and profit involved should be transferred to general reserve
Capital receipt and profit involved should be transferred to Profit & Loss A/c
Answer is Right!
Answer is Wrong!
The correct answer is: A. Capital receipt and profit involved should be transferred to capital reserve.
A capital receipt is a receipt of money that is not part of the normal trading activities of a business. It is usually received from the sale of non-current assets, such as land, buildings, and equipment. The profit involved in the sale of a non-current asset should be transferred to a capital reserve. This is because the profit is not part of the normal trading activities of the business and it is not available for distribution to shareholders.
The other options are incorrect because:
- Option B is incorrect because the amount realized is not a revenue receipt. A revenue receipt is a receipt of money that is part of the normal trading activities of a business.
- Option C is incorrect because the profit involved should not be transferred to a general reserve. A general reserve is a reserve that is used to meet general contingencies. The profit involved in the sale of a non-current asset is not a general contingency and it should not be transferred to a general reserve.
- Option D is incorrect because the profit involved should not be transferred to Profit & Loss A/c. Profit & Loss A/c is a statement of income and expenses. The profit involved in the sale of a non-current asset is not an expense and it should not be transferred to Profit & Loss A/c.