Profit on sale of asset

This query is : Resolved

Balaji (Querist)
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27 July 2009 Profit on sale of an asset, to the extent of the depreciation charged off till the date of sale is to be credited to P&L and the balance credited to Capital Reserve.

IS THIS CORRECT??? Where at all in companies Act do we find such a provision??

Kindly help me out!! and fast!!

Prakash Kanaka M.P.

Prakash Kanaka M.P. (Expert)
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29 July 2009 Eg for a journal entry.

1) When you buy an asset

Plant and Machinery Dr.= Rs.50,000
To
Bank accoutn Cr Rs.50,000

2) End of the year depreciation entry
Depreciation ( P&L)Dr = 1,000
To:
Depreciation Reserve Cr = Rs. 1000

Now the WDV of the Machine is Rs. 49,000
Sales of assets value Rs. 55,000
Profit on Sales Rs. 6,000

3) Sale of Machine for Rs. 55,000

Bank account Dr = Rs. 55,000
Depreciation Reserve Dr Rs. 1,000
To:
Plant and Machinery 50,000
Profit on sale of Assets 6,000