AA-57 How to Record Sell of Those Equipment on Which Depreciation Couldn't be Charged Previously.

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Accounts Officer

717 Points Joined March 2023

All Respected Members,

Please endrose following with giving concept:

Suppose, a business sell an assets on which depreciation of previous years was not charged, sould they pass following entry:

Bank Dr

Loss on Sales. Dr. Loss

Assets Value Cr. (Full Value)

In this case Assets was purchased some years before but it's value is showing same which was at the time of purchase because depreciation was not charged but it's value in market has been reduced, so this Assets will definitely sell in less value so difference of sell value and actual value will record as loss in sell.

I hope that I will receive informative reply on this matter at earliest from members.

Replies (10)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

196537 Points Joined July 2016

The cost of the equipment sold will be WDV of these equipment, as if depreciation would have been charged, even if you may not have claimed it.

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Accounts Officer

717 Points Joined March 2023

Dear Dhirajlal Rambhia Sir,

Thanks for your reply.

Please let me know that as per your above reply, how can we record the sold of equipment in accounts ? Please share journal entry.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

196537 Points Joined July 2016

The answer given above is for the calculation of capital gain, i.e. for income tax purpose. As for accounting, there is no change, you can directly credit the amount received against the respective equipment/s.

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Accounts Officer

717 Points Joined March 2023

Dear Dhirajlal Rambhia Sir,

Thanks for your reply and sorry for my late response.

your above reply is not clear to me.

Suppose, as per your above reply, if I credit the amount received against the respective equipment/s directly and this received amount is less than the equipment cost, how will I nil the remaining balance of equipment account?

please help me out.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

196537 Points Joined July 2016

Balance needs to be transferred to capital gain account.

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Accounts Officer

717 Points Joined March 2023

Dear Dhirajlal Rambhia Sir,

Thanks a lot to prompt reply.

Please educate me, by which suitable account should we transfer this balance amount to P&L ?

Loss on sale of assets account or depreciation account?

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

196537 Points Joined July 2016

Depreciation would be first credited to the asset acc. Then the final balance will get transferred to ST cap gain acc,

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Accounts Officer

717 Points Joined March 2023

Dear Dhirajlal Rambhia Sir,

Thanks a lot for your prompt reply once again.

What I got from above discussion are:

1st we have to charge depreciation on assets by following entry:

Depreciation Expense Dr.

Assets Cr.

(Please educate me here, will we have to charge only current year depreciation ? or previous years depreciation (which we couldn't charge due to some reason) will also have to charge ?)

2nd we have to pass following sold assets entry:

Assets (After Dep. Value/Book Value) Cr.

Bank Dr.

Loss/Gain on Assets Dr./Cr.
(If sold Assets more than book value gain otherwise loss)

Please endrose with your expert views.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

196537 Points Joined July 2016

Yes, Correct.

Depreciation for all the years.

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Accounts Officer

717 Points Joined March 2023

Dear Dhirajlal Rambhia Sir,

Many Many thanks for your precious guidance to resolve this critical matter.

I request you to please always give your expert views on my posts to educate and guide me for adopting right procedure of accounting.

Thanks one again. ❤️