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profits and costs.. can someone please explain?
i don't understand this: "selling land for more than the original purchase price does not result in a revenue if the transaction is not within the central operating focus of the business. instead, the proceeds from sale are offset against the cost of the asset sold and the resulting gain or loss is disclosed as a net amount". what does this mean? also what does it mean by proceeds are offset against costs?
2 Answers
- Joseph TLv 51 decade agoFavorite Answer
If the land is not part of the operations of the business means that it is not directly related to earning a profit. Therefore it is not part of the Revenue and Expense part of the Income Statement . If the land is a non operational investment the gain on sale is shown below the profit line as a net amount.
- 1 decade ago
I'm not sure though, lets say the land's price is 1,000,000 and you were able to sell it by 1,100,000
There is an excess of 100,000, from this amount some cost incurred to sell the land will be offset like Atty's fee, transfer of ownership fee etc. Assuming you were cost 20,000 then your net proceed is 80,000 and this will be recorded as gain on sale of land.
