Disposal of Fixed Assets

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ravi. (Querist)
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18 October 2010 Cost of Machinery on 1.4.2008 - Rs. 5 lakhs
Depreciation for 2 years - Rs. 2 lakhs
WDV on 1.4.2010 - Rs. 3 lakhs
Sale of Machinery on 1.4.2010 - Rs. 6 lakhs

Q. What will be the accounting implications as per Accounting Starndards ?
a. whether 3 lakhs will be credited to P&L ?
or
b. 2 lakhs will be credited to P&L and 1 lakh to Capital Reserve ?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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18 October 2010 Rs.3 Lakh need to credit the particular asset

Rs.2 lakh to be credited in P&L account unless you are previously created the revaluation reserve, refer AS-10

ravi.

ravi. (Querist)
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18 October 2010 but sir what about One lakh which is received over and above the cost of the capital asset ie. 6 lakh - 5 lakh ..

Will it to be credited to Capital Reserve?

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SANJAY TALATI

SANJAY TALATI (Expert)
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19 October 2010 Assuming u are charging depreciation directly to Machinery A/c without creating Depre. Resev, the yearwise entries will be :

In the year of purchase :
Machinery A/c Dr. 5,00,000
To Bank/Party A/c 5,00,000

Year end for charging Deprec.

Depreciation A/c Dr 1,00,000
To Machinery A/c 1,00,000

In the 2nd year

Depreciation A/c Dr 1,00,000
To Machinery A/c 1,00,000

In the year of sell

Bank A/c Dr. 6,00,000

To Profit on sale of Machinery 3,00,000
To Machinery A/c 3,00,000