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.
Debit to Bank a/c and credit to capital a/c
(sale proceeds of old car, purchased 10yrs back)
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/-
| Originally posted by : satish kumar | ||
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Debit to Bank a/c and credit to capital a/c (sale proceeds of old car, purchased 10yrs back) |
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Agree.
cannot credit assets as not recorded earlier. it will be treated as Capital Introduced....
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
CPT students can visit my site for lecture on Accounts:
www.jbsclasses.in
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
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)
I agree with Mr. Karan Kumar Talreja.
Rgds,
Bablu Kumar Jha.
CAclubindia
