Loss on sale of machinery

Mayank Kapoor (.) (159 Points)

20 June 2012

I have a machinery whose book value is Rs 5,00,000 . Its market value is Rs 1,00,000 .

If i sell this machine , what will be the accounting entry / treatment of the loss ??

And what will be the implication of this loss as per Income tax Act ??

Thanks

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12 Replies

KRISHNAPRASAD IYER (B.Com , CA Final) (657 Points)
Replied 20 June 2012

The entry will be:

Cash/Bank a/c Dr 100000

P&L a/c Dr 400000

To Machinery a/c 500000

[being machinery sold for 100000 at a loss of 400000]

The loss will be a short term capital loss assuming that depreciation has been provided on the machinery in the previous years

1 Like

Neha sharma (-) (1257 Points)
Replied 20 June 2012

Agreed with Krishnaprasad...

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@*CS Siddharth Bumb. * (B.Com, CA Final, CS ) (5270 Points)
Replied 21 June 2012

Originally posted by : KRISHNAPRASAD IYER
	The entry will be: Cash/Bank a/c Dr 100000 P&L a/c Dr 400000 To Machinery a/c 500000 [being machinery sold for 100000 at a loss of 400000] The loss will be a short term capital loss assuming that depreciation has been provided on the machinery in the previous years

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Mayank Kapoor (.) (159 Points)
Replied 21 June 2012

Thank you for your reply.

What will be the accounting treatment if I do not want to sell this machine and want to devalue it.

Please let me know the tax treatment also.

KRISHNAPRASAD IYER (B.Com , CA Final) (657 Points)
Replied 21 June 2012

For change in the value, the entry will be:

Revaluation a/c Dr 400000

To Machinery a/c 400000

[being machinery revalued downwards]

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*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 21 June 2012

Originally posted by : KRISHNAPRASAD IYER
	For change in the value, the entry will be: Revaluation a/c Dr 400000 To Machinery a/c 400000 [being machinery revalued downwards]