Profit / loss on sale of fixed assets

I have a query regarding p/l of sale of PPE,

if company has profit on it whether will it hit only p&l account or treat as capital reserve ? also reply for loss as well ?? journal entries??
Replies (8)
Quick Summary
This discussion clarifies the accounting treatment for profits and losses arising from the sale of fixed assets (PPE). Profits exceeding the asset's original cost are treated as a capital reserve, reflecting their capital nature. The difference between the sale proceeds and the asset's book value is recognised in the Profit & Loss account. Losses on sale are debited directly to the Profit & Loss account.

Sale proceeds of the assets is more than the cost then over and above the cost is considered as capital reserve.
sales value is Rs. 120.
cost of the asset is Rs. 100
book value of the asset is Rs. 75

total profit is Rs.45.
out of Rs. 20 is capital reserve. (120-100)
balance is credited to profit and loss a/c Rs. 25/-
(100-75)
Thanks Satish !!

what if in the case of loss ?

and what would be the journal entries in both the cases i.e.profit as well as in loss ?
Loss debited to profit and loss account
Hi Satish, thank you so much for clearing doubts on the above, however, could you please explain that why we are doing so means some part to C/R & some part to P/L..??
Any amount which is realised from sale of asset over and above the cost of that asset is in capital. not revenue.
why because our business is not established for selling of assets so capital nature.
Ex:- in auto mobile show room selling of vehicle is sale of product. revenue income.
where as selling of a vehicle by common public, here vehicle is the asset in the hands of public. so any profit by selling of asset is capital profit.
Very Thanks Satish!!

& difference b/w there cost & book value will come under P/L ..am I right??
Yes. perfect.
Hi Satish, how are you??

going forward to the above query which was about p/l on sale of PPE, if plant is having
cost 20,000
Book value 14,000
sale value 18,000

in this case, sale value is less than cost price so my question is this nothing will be transferred to capital reserve as sales price is less than cost.

could you please journalise the same for my reference ..

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