Profit on sale of assets (Capital or revenue in nature)
This query is : Resolved
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?
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?
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.
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.
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
u shall take whole rs. 75 to Profit & Loss Account and not to capital reserve.
AS 10 deals with the accounting for fixed assets
08 February 2009
Yes Rajat you are correct.
25 to P&l and 50 to Cap.Res
25 to P&l and 50 to Cap.Res
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