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Treatment of profit on sale of fixed assets

SUMIT (A.M.) (53 Points)

24 May 2011

In case an assets is sold on profit (as compare to itd wdv), and the payment will be received in part (monthly), what will be the best treatment for booking of profit, like whole in first month or monthly, based on payment received. Kindly also give reference of AS paragraph if any such matter is given.

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14 Replies

rachit jain (chartered accountant ) (635 Points)
Replied 24 May 2011

as per AS 1 all income and expenses is to be recognized on accrual basis. therefor profit on sale of asset is to be recognized on accrual basis.

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(Guest)

First of all may i know which is that asset and on the other side the treatment will depend on the nature of asset

Recognition of profit will be at last stage will be given but for the accounting treatment asset name is requisite

SUMIT (A.M.) (53 Points)
Replied 24 May 2011

Nature of assets is office buiding...

Pothuganty sudheer (Consultant, C.A, C.S) (411 Points)
Replied 24 May 2011

I agree with Rachit view that income/expenses to be recognised on accrual basis.

Revenue is to be recognised in the year the asset is disposed off and only the receipt is deferred.

Pothuganty sudheer (Consultant, C.A, C.S) (411 Points)
Replied 24 May 2011

This is only my view

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Pothuganty sudheer (Consultant, C.A, C.S) (411 Points)
Replied 24 May 2011

But if your receipt is not coupled with guarantee then you can defer the recognition of revenue.

This is only my view

(Guest)

HI dear sumit

the accounting treatement should be as per AS-10, book the capital nature income ( in p&L as other income) on the date of sales deed with, and if in future amount are non recoverable then you can make the provision.

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Vaibhav gupta (Article) (27 Points)
Replied 25 May 2011

It Should be charged As revenue as it doesnt add to increase in efficiency of the asset.. moreover it is a charge against future repair expenses which r paid as additional warrenty.. so it should be treated as revenue and routed through P/l

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CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 25 May 2011

IT SHOULD BE ON ACCRUAL BASIS

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mukesh choudhary (CA FINAL) (32 Points)
Replied 25 May 2011

IT SHOULD BE TREATED AS PER AS 9 TIME OF RECOGONISATION OF REVENUEIS WHEN CERTAINITY ESTABLISHES IF AT THE TIME OF SALE THEN OTHERWISE AT THE TIME OF RECEIPT OF INCOME

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 25 May 2011

IF the rights have been transferred ..

and there are no doubts on receiving the amt due ...

then it can be treated as accd to AS 1 on accrual basis.

Otherwise it will be treated on receipts basis only.

thanks a lot

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Kunal (Risk Analyst) (299 Points)
Replied 25 May 2011

RECOGNISED ON ACCRUAL BASIS AS PER AS-1 SINCE OWNERSHIP N ALL RISKS N REWARDS HAVE BEEN TRNSFRD.

WILL BE ROUTED THRU P/L ACCOUNT (I.E. REVENUE NATURE) AS PER AS-10.

Ashish Chhawchharia (Chief Manager Finance) (38 Points)
Replied 25 May 2011

It should be on accrual basis and the income should be recognised at the point of time when sale is completed and the risk and ownership of the asset is transferred.

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