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    Question

    Which of the following transactions or items

    would NOT be recognized as an income or expense in the Statement of Profit and Loss prepared under Schedule III of the Companies Act, 2013?
    A Periodic depreciation charged on factory equipment. Correct Answer Incorrect Answer
    B Finance costs incurred on short-term bank borrowings. Correct Answer Incorrect Answer
    C Gross proceeds received from the sale of old machinery. Correct Answer Incorrect Answer
    D Employee benefit expenses, including salaries and incentives. Correct Answer Incorrect Answer
    E Commission received in the ordinary course of agency business. Correct Answer Incorrect Answer

    Solution

    The gross proceeds from the sale of a fixed asset are considered a Capital Receipt and are reflected in the Cash Flow Statement (Investing Activity).  However, the Profit or Loss on the sale (Difference between Sale Price and Book Value) is recorded in the P&L under Other Income or Other Expenses. The actual inflow of the full sale amount is used to reduce the gross block of assets in the Balance Sheet

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