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Block of Assets

CA AMANPREET SINGH (Chartered Accountant) (284 Points)

07 April 2011

If an asset is purchased and eventually sold during same previous year, WHETHER it will form Part of respective block of asset or treated as a separate Capital asset????

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22 Replies

Shriram Ramachandran (IPCC Student CWA Inter & Processing officer in GNSA Infotech Ltd) (492 Points)
Replied 07 April 2011

Hi AMANPREET SINGH

U has to add to the block of asset.

Thanks

R Shriram.

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Devendra (Chartered Accountant) (4775 Points)
Replied 07 April 2011

THE ASSET WILL NOT FORM A PART OF THE BLOCK OF ASSET AND YOU WILL ALSO NOT BE ABLE TO CLAIM ANY DEPRECIATION ON THE SAME.

REGARDS,

DEVENDRA K

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CA AMANPREET SINGH (Chartered Accountant) (284 Points)
Replied 07 April 2011

Thanks Devendra. my personal view is also the same.

Shriram Ramachandran (IPCC Student CWA Inter & Processing officer in GNSA Infotech Ltd) (492 Points)
Replied 07 April 2011

But y we should not add to block asset?

Thanks

R Shriram

Devendra (Chartered Accountant) (4775 Points)
Replied 07 April 2011

Once the Asset is sold the Asset A/c is credited and the Profit / Loss on the same is transferred to the Profit & Loss A/c. Thus the WDV of the Asset becomes Nil.

Regards,

Devendra

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Shriram Ramachandran (IPCC Student CWA Inter & Processing officer in GNSA Infotech Ltd) (492 Points)
Replied 07 April 2011

I cant Get u Deve....... Plz tell me once again in someother words..........

R Shriram

Devendra (Chartered Accountant) (4775 Points)
Replied 07 April 2011

LET US TAKE A SIMPLE EXAMPLE :

XYZ PVT. LTD. HAS A MACHINERY HAVING OPENING WDV1000000. ON 30TH JUNE THE MACHINERY IS SOLD FOR500000. THEN THE LOSS IS500000 (IE.1000000 - 500000)

THEREFORE, JOURNAL ENTRY PASSED ON SALE OF ASSET IS

CASH / BANK A/C DR. 500000

LOSS ON SALE OF MACHINERY A/C DR. 500000

TO MACHINERY A/C 1000000

(BEING MACHINERY SOLD)

NOW DID YOU GET IT.?

REGARDS,

DEVENDRA

2 Like

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 07 April 2011

to shift the capital asset in block of asset it must be in fixed assets schedule on closing day, otherwise its normal transfer in and out and any gain positive or negative would be reflected direct in P/L, depriciation on such capital asset is irrelevant as the asset is transferred out in same FY, so depriciation once claimed then again same amount reflected in P/L by way of gains, does not mean anything.

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Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15607 Points)
Replied 08 April 2011

Very Well Explainded by Devendra.

Totally Agree.

Monik Shah (CA Final) (39 Points)
Replied 08 April 2011

Suppose W.D.V. of the asset on the first day of P.Y. is Rs. 500000/-.

Depreciation for the relevant P.Y. amounted to Rs. 20000/- which inclusive of Rs. 10000/- is for the personal purpose then what will be the Closing W.D.V. at the end of the year???

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praveen (Chartered Accountant) (6971 Points)
Replied 08 April 2011

Originally posted by : U S Sharma
	to shift the capital asset in block of asset it must be in fixed assets schedule on closing day, otherwise its normal transfer in and out and any gain positive or negative would be reflected direct in P/L, depriciation on such capital asset is irrelevant as the asset is transferred out in same FY, so depriciation once claimed then again same amount reflected in P/L by way of gains, does not mean anything.

EXACT LOGIC :D

Deepak Bhardwaj (ACS, LLB & CA Finalist) (132 Points)
Replied 08 April 2011

I was very dissatisfied with way students of CA inter are answering the quesitons regarding the block of the asset.

U see as far as purchasing an asset (fixed asset) or a Depreciable asset is concerned as and when u purchase an asset it becomes the part of the respective block and the individual identity of the asset is completely ignored.

And as far as charging depriciation is concerned you all should remember that depriciation is not charged on individual assets rather it is chargeable on that particular block of asset. For further information.. Look for the section 43(6) ' Written down value for charging depriciation'. the only thing you have to taken into consideration while charging Dep at the end is the inclusion or exclusion of that new asset purchased(if it is put to use for less than 180 days)

Deepak Bhardwaj

1 Like

Shriram Ramachandran (IPCC Student CWA Inter & Processing officer in GNSA Infotech Ltd) (492 Points)
Replied 08 April 2011

Sorry Deepak,

We Inter students come directly from +2 by passing CPT to inter stage of CA. So we will get doubt only when we study. So i dont thing nothig wrong in asking doubts like this. We only know how hard to do CA with out any basics in Some areas like this, in those areas oly we are asking doubts. So plz dont comment on us like this.

Sorry if i have said anything wrong

R Shriram.

1 Like