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Sale of an asset and receipt of payment in installments.
If a business entity sells its asset on a particular date and agrees to get the sale consideration in installment(no written agreements exist and it extends to 2 financial years) without any interest, which way is appropriate to book the profit from the sale of that asset..?!.. Thank You in advance. PS: Curious to know the various accounting treatments available for this particular issue.
Replies (9)
capital gain will be taxable when asset is sold. So show full sale value as consideration.
cash a/c Dr
Debtor for sale of asset Dr
To Asset
when payment is received in installment,
Cash a/c Dr
To Debtor for sale of asset
Whether it will be shown in b/s at the year end if there's still some installments remaining..?! If yes, how..?! Please.explain.. Thanks in advance
In balance sheet,
block of asset
opening balance
add purchase of asset
Less sale value of asset
Capital gain/capital loss
I advise you to refer capital gain chapter of pcc/final
And when the profit from sale of that asset should be recognized in the p&l..?!..
No sir i understood the tax treatment but curious to know the procedure of accounting treatments in the books and financial statements..
It is recognised in the year of sale. No matter payment is received in installment.
"Capital gain may be different from the profit arrived from the sale of asset in the financial books"..is ma notion correct regarding this particular transaction sir..?!
Ya it will be different. Accounting and tax treatment will be different. and profit from both point of view will be also different. But tax will be applicable under income tax act.
Thank you sir.But I've one more doubt regarding the treatment of financial profit. I mean will it be wrong if we recognize the profit to the proportionate of the installment amount recieved( by creating a suspense a/c on the date of sale to the full value of profit and dr. It as we go on receiving the installments)..?!
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