Chitral Sharma (Associate) (30 Points)
07 August 2013Can profit on sale of land directly treansfer to balance sheet as capital reserve without affecting the profit and loss account?
CA Kunal Mishra
(Consultancy Service)
(172 Points)
Replied 07 August 2013
Chitral Sharma
(Associate)
(30 Points)
Replied 07 August 2013
What will be the treatment of same as per Revised Schedule VI, as it does not clarify the disclosure of transfer to the capital reserve?
Hemant Kumar
(Accounts Manager MBA (Fin) CMA*)
(6450 Points)
Replied 07 August 2013
Lokesh
(CS professional)
(493 Points)
Replied 08 August 2013
Dear, the journal entry for profit on sale of Land will be
Ex: If a Land of a value of Rs. 8000 is sold for Rs. 10000
Entry:
1) Cash A/c Dr.10000
To Land A/c 8000
To P & L A/c 2000
2) P & L A/c Dr.2000
To capital Reserve A/c 2000
(Being profit trfd to capital reserve A/c)
You can directly transfer the profit to capital reserve in order to show less profit and thereby less payment of taxes but this is the violation of accounting principles.
Shivani
(Learner)
(1881 Points)
Replied 16 September 2013
lokesh sir
why we transfer the profit on sale of land to capital reserve?
what is capital reserve?
thanks
shivani
RAMESH CHANDRA SHARMA
(munka istentisztelet)
(899 Points)
Replied 23 September 2013
the reason of transferring the profit on sale of fixed asset to capital reserve is that such profit is a capital profit. it is not earned through the main business of the company as capital asset is sold and profit is earned. second thing is that such profit can not be used to pay dividend. there are another example of transferring profit to capital reserve i.e. profit on re-issue of forfeited shares is transferred to capital reserve.
as far as capital reserve is concerned it is a fund which is set aside for some specific purpose and and cant be used for other purpose.
thanks
NILA REJESH P
(Chartered Accountant)
(815 Points)
Replied 04 December 2013
| Originally posted by : Chitral Sharma | ||
 |
Can profit on sale of land directly treansfer to balance sheet as capital reserve without affecting the profit and loss account? |
Profit on sale of land other than revaluation should be credited to P/L Account. |
Assisi Nilus
(3 Points)
Replied 03 January 2023
how do you treat it
Land bought on 1-4-1990
cost: 40lacs
sold a part which has purchase price of 2lacs for 60lacs
Yasaswi Gomes new
(Finance )
(4514 Points)
Replied 04 January 2023
As per the books, 2 laks plus appreciation minus revaluation loss. HC madras made a verdict that land must be indexed and the cost will be the cost. Because people sold the land under suspecious conditiins which avoided taxes. So one must find ouy what is the real procedure cause indexation is not a gaap measure yet. Once you kbow the cost
Indexed cost or book Cost =2.5
Nrv= 3
Sold for 5
Bank dr 5
Gain cr 2.5
Land cr 2.5
CAclubindia
