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      Question

      Which of the following transactions or items

      wouldĀ NOTĀ be recognized as an income or expense in theĀ Statement of Profit and LossĀ 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

      TheĀ gross proceedsĀ from the sale of a fixed asset are considered aĀ Capital ReceiptĀ and are reflected in theĀ Cash Flow StatementĀ (Investing Activity).Ā  However, theĀ Profit or LossĀ 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 theĀ Balance Sheet

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