Treatment for destruction of asset

210 views 1 replies

Jithu Samuel Mohan

Articled Assistan/Student

42 Points Joined March 2016

Doubt:Destruction of part of asset Method1:Loss is charged to p&l and loss is deducted from balance of the fixed asset in balance sheet. Effect:Profit becomes a small value. Method2:Loss is deducted from capital in balance sheet as well as from the asset.Not charging to p&l. Effect:P&l value is high. In Both methods balance sheet and related a/c are all tallied. Question:Is method 2 applicable/Practical/Correct?

Replies (1)

Guest

Method 1 is correct...

According to companies act, u cannot reduce the capital of a company...and loss of asset should be taken in profit and loss account and credit the asset account....