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Plz help me about 1 journal entry

mjdf13 (junior accountant) (59 Points)

06 April 2013

SIR , MY FRIEND WORKING IN DUBAI, A VEHICLE WHICH WAS PURCHASED NEARLY 10 YRS BACK NOW ITS IS SOLD FOR 500,000 DIRHAMS, AND BANK A/C CREDITED WITH 5,00,000. THERE IS NO INFORMATION ABOUT THIS ASSET AND NO DEPRECIATION IN THE RECORDS, SO WHICH A/C TO BE DEBIT PLZ HELP THIS GUY,

THANKS IN ADVANCE FOR ALL PROFESSIONS WHO WILL ANSWER THIS.

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8 Replies

nitin (article) (31 Points)
Replied 06 April 2013

Bank A/c dr To asset (vehicle) A/c

1 Like

satish kumar Chauhan (accountant) (344 Points)
Replied 06 April 2013

Debit to Bank a/c and credit to capital a/c

(sale proceeds of old car, purchased 10yrs back)

1 Like

CA D.C. Bansal (Accounts Head) (283 Points)
Replied 06 April 2013

As you do not have any information about the purchase cost of the vehicle, it will be presumed as nil and you will have to credit the entire proceed to income a/c. You will have to pass the following entry in the books.

Bank A/c...........................................Dr. 5,00,000/-

Profit on Sale of Assets Cr. 5,00,000/-

1 Like

Deep@k $ingh@l (CA>FINAL May'14) (595 Points)
Replied 06 April 2013

Originally posted by : satish kumar
	Debit to Bank a/c and credit to capital a/c (sale proceeds of old car, purchased 10yrs back)

Agree.

cannot credit assets as not recorded earlier. it will be treated as Capital Introduced....

1 Like

Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 06 April 2013

If this car was your friend's personal property, he need not pass any entry anywhere. If he is putting in this money in his business, then this will be treated as his capital. Entry in the books of his business will be:

Bank A/c Dr.

To Capital A/c

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www.jbsclasses.in

BALAJI R (JAO) (33 Points)
Replied 07 April 2013

As per my understanding, your friend is working for an organisation and the vehicle belongs to the organisation. There are two possibilities. This asset would have been clubbed with some other class of assets. Another chance is that this asset would have been omitted to be recognised as such during purchase and the cash outflow might have been treated as some general expense.

In the first case, efforts may be taken to identify the asset and treatment may be given accordingly. In the second case, entire sale proceeds may be treated as income and the journal entry is:

Bank a/c Dr.

To profit on sale of assets a/c

1 Like

Karan kumar Talreja (Chartered Accountant) (21 Points)
Replied 08 April 2013

Solution is little complicated but perfect. You should find out the vehicles Market value 10 years ago and apply the depreciation rate on it for 10 years to reach at its NBV as of today. Sale price less NBV would be your profit or loss.

If profit:(JE would be)

Bank A/c dr 5,00,000

To asset (NBV) cr

To profit on sale (5,00,000-NBV) cr

If loss:

Bank A/c dr 5,00,000

Loss on sale dr (NBV-5,00,000)

To Asset cr (NBV)