Fixed Assets

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Purushotham (Querist)

15 February 2010 We have recently sold out our company's fixed assets like furniture & vehcile.... can anybody help me what could be the accounting process for it?

Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)

15 February 2010 The accounting process depends on the method followed by the company for recording the assets. i.e. either the block concept or the individual asset concept.

In case of the block of asset is maintained, the proceeds of sales are deducted from the value of block. In this case, the profit or loss on sale is not booked at the time of sale. However, after selling the asset, if there is no asset in the block, then the treatment shall be as given in the second case of individual asset method.

In case the asset is maintained on one to one basis, or where in case of block concept, the block is empty after the sale of asset, then the treat shall be as under:

Deduct the sale price from the WDV of asset or the block. In case, balance after deducting is positive, the transfer the amount to loss on sale of asset and if the balance is negative, then transfer the amount to profit on sale of asset. Needless to say, but if the balance is zero, then it shall be no profit no loss condition.

Also while arriving at the WDV, also calculate the depreciation till the date of sale of the asset.

However, in case the calculation is for income tax purpose, then depreciation in the year of sale shall not be calculated.

DEEPIKA GOEL

DEEPIKA GOEL (Expert)

15 February 2010 Firat thing i want to clarify that as per companies act does not allow to follow the block concept. Thats why the companies have to prepare separate depreciation schedule as per Schedule IV of the companies act and one for Income Tax Act.

As per Schedule IV of the companies act, the company cannt follow block concept.

As enquired by you, the procedure to account for the sale of fixed assets.

- first hv to calculate the WDV of the particular fixed asset which has been sold from the date of purchase or installation watsoever till the date of purchase.

- Deduct the realised value from the WDV calculated.

If it is positive, there is loss on sale of fixed asset and book it in the profit and loss.

If negative, there is profit on sale of fixed assets and to be credited to profit and loss account

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Purushotham

Purushotham (Querist)

16 February 2010 thank you very much

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