Question

A motor car which was purchased for Rs. 20,000 had its book value Rs. 12,000 and was sold for Rs. 25,000. What is the capital profit?

• A. Rs. 5,000
• B. Rs. 8,000
• C. Rs. 13,000
• D. Rs. 25,000

Answer 1

The correct option is A Rs. 5,000

When an asset is sold over an above the original cost, the difference is considered as capital profit. The difference between the book value and sale price after considering the capital profit is considered as revenue profit.

In the given situation:

Sale Price Rs.25000

Less Book Value Rs.12000

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Profit Rs.13000

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Capital Profit

Sale Price - Orignal Cost i.e Rs.25000 - Rs.20000 = Rs.5000

Revenue Profit

Original Cost - Book Value i.e. Rs. 20000 - Rs.12000 = Rs.8000