Question

MCQ. Questions 1 -Loss on sale of investment in..............

Answer 1

Answer:

When a company sells an investment, it results in a gain or loss which is recognized in income statement. A gain on sale of investment arises when the (disposal) value of an investment exceeds its cost. Similarly, a capital loss is when the value of investment drops below its cost.

Answer 2

We are asked the question as to where will 'Loss on investment ' be written. The answer is the Profit and Loss account and Balance Sheet.

• Usually, entries are written in two places.
• One place where the balance amount will be written is the Balance Sheet.
• The other place where the entries are written is the Trading or Profit and Loss account.
• In the trading account whatever the direct expenses the organization has paid will be entered.
• In the Profit and Loss account, all the indirect expenses the organization has paid will be written.
• So as a loss on the investment is an indirect expense it will be entered into the debit side of the Profit and Loss account.
• As we no longer have the investment this amount has to be written off.
• So it will be written on the credit side of the Balance Sheet.

PROJECT CODE:#SPJ3