Fixed Assets Sold Out
This query is : Resolved
15 December 2016
We had 4 fixed asstes in the balance sheet at the end of 31st march-2016 all valued at approx 8 lac.our company solt out all the 4 assets for Rs. 325000.and such receipt is deposited by company in its bank account.Kindly tell me what treatments are needed to be done in the books of account of the company.Also tell me the status of balance sheet as all the fixed assets of previous year has been sold out
15 December 2016
U need to calculate the actual cost of the assets after adding and deducting all appreciation and depreciation on the assets respectively till the date of disposal. After that compute the profit or loss and then the treatment should b done in financial accounts.
24 July 2024
To account for the sale of fixed assets and its impact on your company's books, you will typically need to make several entries. Here’s a step-by-step guide:
### Entries Required:
1. **Record the Sale of Fixed Assets:**
- Debit Bank Account: Rs. 325,000
- Credit Fixed Assets (Individual Asset Accounts): Rs. 200,000 (if each asset was valued at approximately Rs. 8 lac in total)
- Credit Accumulated Depreciation Account: Rs. X (amount of accumulated depreciation related to the assets sold)
- Credit Profit on Sale of Fixed Assets (or Debit Loss on Sale of Fixed Assets if applicable): Rs. Y (calculate as Rs. 325,000 - Net Book Value of the assets)
Explanation:
- Debit Bank Account: Represents the cash received from the sale.
- Credit Fixed Assets: Removes the value of the assets from the balance sheet.
- Credit Accumulated Depreciation: Removes the accumulated depreciation related to the assets sold.
- Credit Profit or Loss on Sale: Recognizes the gain or loss on the sale.
2. **Adjust Accumulated Depreciation:**
- Debit Accumulated Depreciation Account: Rs. X (amount of accumulated depreciation related to the assets sold)
- Credit Depreciation Expense Account: Rs. X (to adjust for the depreciation expense up to the date of sale)
Explanation:
- This entry adjusts the accumulated depreciation account to reflect the depreciation expense up to the date of sale.
3. **Remove Fixed Assets from Balance Sheet:**
- Update the Fixed Assets schedule or register to reflect the removal of the sold assets.
### Balance Sheet Impact:
- After making the above entries, the balance sheet will reflect:
- Decrease in Fixed Assets by Rs. 8,00,000 (the original value of the assets)
- Decrease in Accumulated Depreciation by the corresponding amount of accumulated depreciation for the sold assets.
- Increase in Bank or Cash by Rs. 3,25,000 (the proceeds from the sale)
- Recognition of Profit on Sale of Fixed Assets (if the proceeds exceed the net book value) or Loss on Sale of Fixed Assets (if the proceeds are less than the net book value).
### Summary:
- **Number of Entries:** Typically, you will need to make 3 entries:
1. Entry for recording the sale of fixed assets and the receipt of cash.
2. Entry to adjust accumulated depreciation.
3. Adjustments to the Fixed Asset schedule or register.
- **Status of Balance Sheet:** After the sale, the balance sheet will no longer show the fixed assets that were sold, and the asset and liability sides will reflect the adjustments made from the sale proceeds and related entries.
It's recommended to consult with your accountant or financial advisor to ensure compliance with accounting standards and the correct treatment of any gain or loss on the sale of fixed assets.
### Entries Required:
1. **Record the Sale of Fixed Assets:**
- Debit Bank Account: Rs. 325,000
- Credit Fixed Assets (Individual Asset Accounts): Rs. 200,000 (if each asset was valued at approximately Rs. 8 lac in total)
- Credit Accumulated Depreciation Account: Rs. X (amount of accumulated depreciation related to the assets sold)
- Credit Profit on Sale of Fixed Assets (or Debit Loss on Sale of Fixed Assets if applicable): Rs. Y (calculate as Rs. 325,000 - Net Book Value of the assets)
Explanation:
- Debit Bank Account: Represents the cash received from the sale.
- Credit Fixed Assets: Removes the value of the assets from the balance sheet.
- Credit Accumulated Depreciation: Removes the accumulated depreciation related to the assets sold.
- Credit Profit or Loss on Sale: Recognizes the gain or loss on the sale.
2. **Adjust Accumulated Depreciation:**
- Debit Accumulated Depreciation Account: Rs. X (amount of accumulated depreciation related to the assets sold)
- Credit Depreciation Expense Account: Rs. X (to adjust for the depreciation expense up to the date of sale)
Explanation:
- This entry adjusts the accumulated depreciation account to reflect the depreciation expense up to the date of sale.
3. **Remove Fixed Assets from Balance Sheet:**
- Update the Fixed Assets schedule or register to reflect the removal of the sold assets.
### Balance Sheet Impact:
- After making the above entries, the balance sheet will reflect:
- Decrease in Fixed Assets by Rs. 8,00,000 (the original value of the assets)
- Decrease in Accumulated Depreciation by the corresponding amount of accumulated depreciation for the sold assets.
- Increase in Bank or Cash by Rs. 3,25,000 (the proceeds from the sale)
- Recognition of Profit on Sale of Fixed Assets (if the proceeds exceed the net book value) or Loss on Sale of Fixed Assets (if the proceeds are less than the net book value).
### Summary:
- **Number of Entries:** Typically, you will need to make 3 entries:
1. Entry for recording the sale of fixed assets and the receipt of cash.
2. Entry to adjust accumulated depreciation.
3. Adjustments to the Fixed Asset schedule or register.
- **Status of Balance Sheet:** After the sale, the balance sheet will no longer show the fixed assets that were sold, and the asset and liability sides will reflect the adjustments made from the sale proceeds and related entries.
It's recommended to consult with your accountant or financial advisor to ensure compliance with accounting standards and the correct treatment of any gain or loss on the sale of fixed assets.
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