Journal Entry

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 February 2011 An old machinery (worth Rs. 84000) exchanged for a new machinery (worth Rs. 324000) by XYZ ltd payment made 256000
what will be the journal entry for this

S.A.BADAMIKAR

S.A.BADAMIKAR (Expert)
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25 February 2011 It is better to treat both transactions seperate to have correct accounting.
1] For sale of Old Machinery - You have to work out whether there is profit or loss - If profit then Pass following entry :
XYZ ltd. A/c debit (Sale consideration) ,
To Old-Machinery A/c credit (WDV value) ,
To Profit on Sale of Machinery Credit (difference Between Sale VAlue & WDV)
If loss :
XYZ ltd. A/c debit (Sale consideration)
Loss on Sale of Machinery debit (difference Between WDV & Sale Value )
To Old-Machinery A/c credit (WDV Value)
2] For Purchase of New Machinery :
New Machinery A/c Debit Rs. 324000/-
To XYZ ltd credit Rs. 324000/-