Profit on sale of assets

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Varun Dhiman (Querist)
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14 October 2013 what will be journal entry regarding profit on sale of asses in invidiual or in companies . whether it will transfer in profit&loss account or capital reserve in both case

warms regards
varun dhiman

CA Pallav Singhania

CA Pallav Singhania (Expert)
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14 October 2013 Cash / Bank / Debtor A/c (in case of credit sale) Debit
To Fixed Asset A/c Credit
To Profit and loss A/c

{Being asset sold in profit}

Note: In case of revaluation of asset such profit is transferred to capital reserve...

Varun Dhiman

Varun Dhiman (Querist)
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15 October 2013 thanx for suggestion , but definition of capital reserve include profit on sale assets.and also in income tax act profit on sale of asset less from net profit, please suggest.

CA Pallav Singhania

CA Pallav Singhania (Expert)
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15 October 2013 For the taxation purpose:

If an asset is sold @ 20000 {WDV 5000}

Then Sale Proceed - WDV = Short term capital gain
20000-5000 = 15000

However, in case of block of assets,
Any asset of the block sold in excess of the WDV of the block then it will be a short term capital gain,The remaining block will be valued as NIL...

If it sold less than WDV it will be a short term capital loss...

Note:Any asset sold more than its Actual cost then it will be termed as Business Gain..

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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15 October 2013 Agreed and the definition in capital reserves means this kind of income can be transferred to capital reserve and this is not compulsory an option given to entities.

Varun Dhiman

Varun Dhiman (Querist)
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15 October 2013 brother, thanx for suggestion , then wy definition of capital reserve include profit on sale of investment

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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15 October 2013 Because investments only long term in nature are capital in nature so all items of capital in nature can be dealt with captial reserve as the name itself suggest.

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