Accounting entry of Capital Gain on Property

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Sandip Pandya (Querist)
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04 February 2010

If A has sold his Residential property at Rs.25,00,000/- in 2008-09 which was purchased at Rs.3,00,000/- in 1981-82 and purchased new residential property in 2007-08 at Rs.12,00,000/-, what would be the accounting entry in books.

Sandeep Kumar Sahu

Sandeep Kumar Sahu (Expert)
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04 February 2010 Dear Sandip,

From your question it seems that there are two propoerties and the second one has nothing to do with the first one because it was puchased in 2007-08 and the fist on is sold on 2008-09, as far as the accounting treatments are concerned. Capital gain is a taxation matter and it will not reflect in books thru accounting entry. Only profit in selling the property will appear in the books of accounts.

CA.Pujah

CA.Pujah (Expert)
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04 February 2010 You are confusing accounting & taxation. If you go by Accounting in 2008-09 you book a profit of 2200000 & purchase of another property will stand in books at 1200000/-.
If you go by taxation, you will take advantage of indexation & calculate capital gain & pay tax thereon.

M Prabhakar Menon

M Prabhakar Menon (Expert)
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04 February 2010 In which year do you want to pass the entries,in the year of sale or in the current accounting year? In that year which account did you credit the sale proceeds to? was it routed through bank? The entry will depend on your answer to these querries

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