Journal Entry Asset Sold

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Asset Sold

After using fixed asset, it becomes old.

Sometime it may be useless or outdated.

In this condition, asset should be sold.

While selling assets, there may be profit or loss.

Accumulated depreciation   = Original value – Book salvage value

Profit = Cash salvage value − Book salvage value

Loss = Book salvage value − Cash salvage value

 

Sales of Assets or Fixed Assets

Cash account   Bank account  Customer or debtors XYZ Trader account Profit and loss (loss) account         To Asset account (name of asset)         To Profit and loss (profit) (Being- assets sold at ………………………………                        .

Dr Dr Dr Dr Dr

Cash received  Cheque received Credit sold to person  or firm Credit sold to firm If assets sold at loss Value of assets If assets sold at profit

Increase in assets Increase in assets Increase in assets Increase in assets Increase of loss Decrease in assets Increase of profit

Keep in Mind (KIM)

Name of assets: Plant and machinery, land and building, furniture, fitting, equipment, vehicle, computer In one problem (question) either loss or profit. Sales of assets are not goods sold; therefore, we MUST NOT write sales. We must write name of assets.

Profit on sales on fixed assets is capitalised gain. Actually, it is adjusted under capital reserve. But in practice, it is also adjusted under profit and loss account.

 

 

Journal Entry

In the book of …………

Date	Particulars		LF	Amount Dr	Amount Cr
	Cash account   Bank account   Customer or debtors   XYZ Trader account    Profit and loss (loss) account         To Asset account (name of asset)         To Profit and loss (profit) (Being- assets sold at ……………………………………………………                       …	Dr Dr Dr Dr Dr		xxxxx xxxxx xxxxx xxxxx xxxxx	xxxxx xxxxx

PROBLEM: 5A

ABC Stationery sold old computer for 10,000.

Required: Journal entry

[Answer: Cash = 10,000]

SOLUTION:

Journal Entry

In the book of ABC Stationery

Date	Particulars		LF	Amount Dr	Amount Cr
	Cash account                                             To Computer account (Being- old computer sold in cash)                                                                .	Dr		10,000	10,000

Journal Entry for American Style

Date			Debit  $	Credit $
	Cash account                                                                                  To Computer account To record computers sold for cash		10,000	10,000

Journal Entry for European Style

Date				€	€
	Cash account          To Furniture account To record furniture sold for cash	Dr		10,000	10,000

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PROBLEM: 5B

Star Television sold old AV Van costing Rs 16,00,000 for Rs 12,00,000 and received cheque.

Required: Journal entry

[Answer: Loss = 400,000]

SOLUTION:

Journal Entry

In the book of Star Television

Date	Particulars		LF	Amount Dr	Amount Cr
	Bank account P&L account (loss)             To AV Van account (Being- van sold at loss)                                                                                  .	Dr Dr		12,00,000 4,00,000	16,00,000

PROBLEM: 5C

BK Traders sold land and building costing Rs 8,00,000 for Rs 11,00,000 and received cheque.

Required: Journal entry

[Answer: profit = Rs 300,000]

SOLUTION:

Journal Entry

In the book of BK Traders

Date	Particulars		LF	Amount Dr	Amount Cr
	Bank account          To Land and building account          To P&L account (profit) (Being- land and building sold at profit)                                                       .	Dr		11,00,000	8,00,000 3,00,000

PROBLEM: 5D

FG Traders sold furniture costing Rs 15,000 at loss of Rs 3,000.

Required: Journal entry

[Answer: Sales value = 12,000]

SOLUTION:

Journal Entry

In the book of FG Traders

Date	Particulars		LF	Amount Dr	Amount Cr
	Cash account (b/f) P&L account (loss)          To Furniture account (Being- furniture sold at loss)                                                                         .	Dr Dr		12,000 3,000	15,000

PROBLEM: 5D

An old motor bike costing Rs 60,000 sold at profit of Rs 2,000 by ABC Traders. Transaction made through cheque.

Required: Journal entry

[Answer: Sales value = 62,000]

SOLUTION:

Journal Entry

In the book of ABC Traders

Date	Particulars		LF	Amount Dr	Amount Cr
	Bank account (b/f)                                     To Motor bike account          To P&L account (profit) (Being- motor bike sold at profit)                                                                  .	Dr		62,000	60,000 2,000

PROBLEM: 5E

Anju & Company follows straight line depreciation method for depreciation @ 15 p.a. for assets. Company purchased a laptop 3 years ago at Rs 60,000. At the end of 3^rd year, company sold laptop at Rs 25,000 and cheque received.

Required: Profit or loss and journal entry

[Answer: Loss = 8,000]

SOLUTION:

Given and working note:

Depreciation per year        = Rs 60,000 @ 15%         = Rs 9,000

Depreciation for 3 years    = Rs 9,000 x 3 years        = Rs 27,000

Book salvage value = Original value – Accumulated depn = Rs 60,000 – Rs 27,000 = Rs 33,000

Loss = Book salvage value – Cash salvage value (sold value) = 33,000 – 25,000 = Rs 8,000

 

Journal Entry

In the book of Anju & Company 

Date	Particulars		LF	Amount Dr	Amount Cr
	Bank account                                    Accumulated depreciation account        P&L account (loss)                                   To Laptop account  (Being- laptop sold at loss)                                                                              .	Dr Dr Dr		25,000 27,000 8,000	60,000

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PROBLEMS AND ANSWERS

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

PROBLEM: 5

City Book Depot has following extracted data:

Old cycle sold for cash Rs 1,000.

Old bike book valued of Rs 60,000 had been sold for Rs 62,000 and cheque received.

Old furniture book value Rs 15,000 sold for Rs 9,500 on credit.

Land worth Rs 400,000 was sold for Rs 700,000 and bill received.

Required: Journal entry

 

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