Profit on sale of assets (Capital or revenue in nature)

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Rajat (Querist)
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04 February 2009 Historical cost of asset Rs 100
Written down value Rs 75

Sold the assets at Rs 150. That means profit of 75 Rs.

I heard that out of this 75 Rs profit, 25 Rs will be credited to P&L A/c and 50 Rs will be transferred to capital reserve. Is this treatment correct?

If yes, under which AS/ASI can I read about this treatment method?

Sreedhar Atchutuni ACA,GradCWA

Sreedhar Atchutuni ACA,GradCWA (Expert)
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05 February 2009 Capital reserve account can be made from government subsidies, donated funds, set aside from firms regular revenue generating operations.

so, the company can take full Rs.75 to P&L a/c or Rs.25 to p&l and Rs.50 to Capital Reserve since sale of asset is a regular activity but not extra ordinary activity.

Nilesh Damji Chheda

Nilesh Damji Chheda (Expert)
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07 February 2009 rajat

u shall take whole rs. 75 to Profit & Loss Account and not to capital reserve.

AS 10 deals with the accounting for fixed assets

CA Nitin Wadhwani

CA Nitin Wadhwani (Expert)
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08 February 2009 Yes Rajat you are correct.
25 to P&l and 50 to Cap.Res

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