Example of Rent Revenue

Example of Rent Revenue

According to the international financial reporting standards revenues arise from the normal business activates. Rent can be revenue, following example explain rent as revenue

Example of Rent as Revenue

MR. Ali constructed a five stories building that have 50 residential flats. Mr. Ali built this building with a view for a fixed monthly rental income. During the year only 30 flats were hired @ 15,000 and Ali expects that remaining flat would be hire in next year. Calculate the rental income. Mr. Ali sold another building for 200,000 which had a net book value of 80,000.

Solution

Revenue can be recognized only against the benefit received during the year, there is no recognition for the future income, therefore income of only 30 flats will be recognized.

Revenue (Rental Income)	450,000
Building Sold Gain  ( 200,000-80,000)	120,000
Income	570,000

Gain =Sale proceed of asset minus net book value of asset.