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Treatment for destruction of asset
Doubt:Destruction of part of asset
Method1:Loss is charged to p&l and loss is deducted from balance of the fixed asset in balance sheet.
Effect:Profit becomes a small value.
Method2:Loss is deducted from capital in balance sheet as well as from the asset.Not charging to p&l.
Effect:P&l value is high.
In Both methods balance sheet and related a/c are all tallied.
Question:Is method 2 applicable/Practical/Correct?
Replies (1)
Method 1 is correct...
According to companies act, u cannot reduce the capital of a company...and loss of asset should be taken in profit and loss account and credit the asset account....
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