Sales of Fixed Assets | How to dealt with ?

In business, many times situation arise when an unit needs to sell assets due to one or another reason. Here many novice tally user esp who don’t have proper accounting knowledge will get confused to record the transaction.

To understand treatment of accounting entries in tally.erp 9 for fixed assets sale first we should understand the meaning of fixed assets.

Fixed assets is a tangible or intangible assets (movable or immovable) assets which is ordinary does not purchased in normal course of business activities. It is a permanent type of investment (long term Investment) and the purpose of purchasing such asset is not to earn profit by way of selling the same.

While Goods are purchased for the purpose of earning a profit by re selling/producing other items. So, purchase /sale of such goods must be entered through a purchase/sales vouchers.

for e.g. a trader who is in the business of trading of ready made garments, purchase of furniture for him is not Goods but it is A fixed assets

Now when you sell such  a fixed assets, you should pass a journal entry for the same. you can’t treat it a normal sale.

Similarly you  should calculate depreciation on such sold assets up to the date of sale and would be transferred to related assets.

The sales price may be less or more than its actual purchase price/written down value. difference of the same was treated as PROFIT/LOSS ON SALE OF FIXED ASSETS under Indirect expenses and the same is accounted through a journal voucher.

Let’s take a practical example to see how to pass journal entry for sale of fixed assets

ABC bros.  who is into the business of tours and traveling, sold furniture for Rs. 15000.00 which was bought  3 months ago for Rs. 18000.00 .

Now the entry can be made as under :

Debit Cash  Rs. 15000

Credit Furniture Rs. 15000

(Being sale of furniture)

Debit depreciation account Rs. 450

Cr. Furniture    Rs. 450

(Being 10% dep. for 3 months )

Debit loss on sale of assets    Rs. 2550

(Under indirect expenses)

Credit Furniture Account   Rs. 2550

Being loss suffered on sale of fixed assets

In the above example, you will see that Furniture account is squared off

Do not forget to share your experience in sale of assets have you ever come to some complex transaction on fixed assets ?

If you have any specific query, you may mention the same on our forum

to calculate depreciation, you should confirm the rate with your IT consultant or local consultant prevailing rules in your country place.

Update : Thanks to Mr. Imtiyaz Ali, From Dubai for pointing out mistake in the above example

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