Loss on sale of machinery

Hi

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

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

Agreed with Krishnaprasad...

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.

For change in the value, the entry will be:

Revaluation a/c     Dr       400000

     To Machinery  a/c                        400000

[being machinery revalued downwards]

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]

Agree with Krishan .., You can revalue your assets and make change accordingly.

There will be short term capital only if the total block of the asset nil

Will the revaluation have any tax impact??

There will be tax impact only when thre is extension/improvement.

Therefore, in this case, there will be no tax impact