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Question

Ram, a fruit seller, sold oranges and received Rs 100. He borrowed Rs 100 from his friend Shyam. Classify them as revenue and liability.


  1. Revenue - Money received from selling oranges
    Liability - Money received from friend

  2. Revenue - Money received from selling oranges
    Revenue - Money received from friend

  3. Revenue - Money received from friend 
    Liability - Money received from selling oranges

  4. Liability - Money received from selling oranges
    Liability - Money received from friend


Solution

The correct option is A

Revenue - Money received from selling oranges
Liability - Money received from friend


Ram is a fruit seller and oranges are goods for him.
i) Money received from selling oranges (goods) are revenue for Ram. 
ii) Since Ram borrowed Rs 100 from his friend Shyam, he is obliged/liable to pay Shyam in the future. Hence, money received from his friend is a liability.

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