Sale of asset accounting treatment

suppose a company's original value of the building is Rs 50 lacs, wdv is Rs 35 lacs and it sells  this building  for Rs 60 lacs.   

the difference between wdv and original value of Rs 15 lacs (rs 50 lacs minus 35 lacs) will be credited to the profit and loss account obviously. 

can  i take the  excess amount of Rs 10 lacs over and above original value to the balance sheet as capital reserve instead of profit and loss account. pl explain the treatment as per the accounting standard and not from income tax point of view..   thanks n regards

 thanks n regards

Replies (2)
Quick Summary
This discussion explores the accounting treatment for the sale of an asset. The original value was Rs 50 lacs, with a Written Down Value (WDV) of Rs 35 lacs, and it was sold for Rs 60 lacs. The difference between the original value and WDV (Rs 15 lacs) is depreciation. The profit on sale is calculated as the sale price minus the WDV (Rs 25 lacs). The key question is whether the excess amount over the original value (Rs 10 lacs) can be credited to a capital reserve instead of the profit and loss (P&L) account. The consensus is that profit on the disposal of a fixed asset is recognised in the P&L account as it's an indirect income and classified under SPL (Statement of Profit or Loss), not directly to reserves.

Original amount is 50 lacs
WDV is 35 lacs
means depreciation is (50-35)= 15 lacs should be debited to profit and loss account

Sale value is 60 lacs
means Profit should be (60-35) = 25 lacs should be credited to profit and loss account.

Profit on disposal of fixed asset is a indirect income and is therefore recognised in profit and loss account which is a Free Reserve. It is not permanently invested in business, but can be use by firm for various purpose(including for the payment of dividend)

THere are guidelines governing the transfer of retained earnings to reserves outlined here: https://www.mca.gov.in/Ministry/actsbills/rules/CToPtRR1975.pdf

Next, gain on disposal is classified to SPL and not SOCIE or OCI. So it is not possible to directly credit the gain to reserves.

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