Fixed Assets (machinery) of company kept in a store house got destroyed (rusted beyond repair) and is not in a condition to be sold to anybody. There is no scrap value either. How to account for this in the books of accounts?
4 Replies
Pinky Agarwal
(Chartered Accountant)
(426 Points)
Replied 28 July 2011
I think it will be treated as loss on machinery and is required to be written off in profit & loss A/c, Entries will be as follows:-
1. Loss on destroyed machinery A/c ................Dr.
To Machinery A/c
2. Profit & loss A/c ..................Dr.
To Loss on destroyed machinery A/c
Regards,
Pinky Agarwal..
Mihir
(Wealth Manager)
(5293 Points)
Replied 28 July 2011
The company does not come under tax audit, but at the time of preparing notes to accounts by a CA, does the company need to provide some sort of proof of the machinery being destroyed?
Suraj S
(Audit Executive)
(335 Points)
Replied 28 July 2011
The CA may conduct physical inspection of the destroyed plant & machinery or the co. may take a valuation certificate from a chartered engineer or a valuer as to the p&m is completely destroyed & it cannot be further put to use. Also unless it affects the going concern concept of co. i don't think there is a need for reporting by the auditor or in the notes on accounts.......
Also Mihir all Comapnies are liable for tax audit !!!!!!!!!
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