Question

Amount received from the sale of furniture Rs 7000. (Book value Rs 10,000). The amount to be shown in receipts and payments account will be :

• A. Rs 10,000 on the receipts side
• B. Rs 7000 on the receipts side
• C. Rs 3000 on the payment side
• D. Rs 3000 on the receipts side

Hint:

Receipts and Payments Accounts only show the actual money flow to determine balance of cash and bank at the time of dissolution, hence, the profit or loss of sales are not shown in that account.

Answer 1

The Correct Option is B

Understanding Receipts and Payments Account:
This account is a summary of all cash transactions, indicating where cash came from (receipts) and where it went (payments). In this context, we focus on the cash received from selling an asset.
Accounting for Asset Sale:
The furniture was sold for Rs7,000. This represents actual cash coming into the business
The receipt and payments a/c only show cash in and cash out during the dissolution, hence, the book value is not considered in this case.

Therefore, The amount to be shown in receipt and payments A/c will be Rs 7000 on the receipts side.