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Profit on sale of assets (Capital or revenue in nature)

This query is : Resolved 

04 February 2009 Historical cost of asset Rs 100
Written down value Rs 75

Sold the assets at Rs 150. That means profit of 75 Rs.

I heard that out of this 75 Rs profit, 25 Rs will be credited to P&L A/c and 50 Rs will be transferred to capital reserve. Is this treatment correct?

If yes, under which AS/ASI can I read about this treatment method?



05 February 2009 Capital reserve account can be made from government subsidies, donated funds, set aside from firms regular revenue generating operations.

so, the company can take full Rs.75 to P&L a/c or Rs.25 to p&l and Rs.50 to Capital Reserve since sale of asset is a regular activity but not extra ordinary activity.

07 February 2009 rajat

u shall take whole rs. 75 to Profit & Loss Account and not to capital reserve.

AS 10 deals with the accounting for fixed assets

08 February 2009 Yes Rajat you are correct.
25 to P&l and 50 to Cap.Res


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