Question

Mr. Sudesh sold his house on 1st may 2010 for `12,00,000. This house was purchased by his father

in 1960 for `50,000. Mr. Sudesh got this house in inheritance on the death oh his father in 1977-78.

On 01.04.1981 fair market value of this house was `1,50,000. On 1st December 2010 he purchased

another house for `2,50,000. For his assessment year 2017-18 calculate his capital gain.​

Answer 1

now from the above information we know that the house was purchased cost 50000 so it recognised only as 50000 even it's value is in crores

this is explained by cost concept

but as per conservatism we can decrease the value of market price is less than purchase price

but should not be increased

so when the house is sold the entry will

cash a/c Dr. 120000

to realisation a/c -. 1150000

to house a/c. -. 50000

so capital gain is 1150000

the entry is

realisation account dr1150000-

to capital account-. 1150000