satish (teaching) 04 April 2020
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/-
satish (teaching) 06 April 2020
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.
Rahul (MT) 02 July 2020
Hi Satish, how are you??
going forward to the above query which was about p/l on sale of PPE, if plant is having
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 ..