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

  • ALI

    As you mentioned above illustration , cash a/c to furniture,according to my knowledge that journal voucher is a non cash voucher.Is it yes or no sir , jst let me know

    • http://www.tallynine.com Mahendra

      Ali,
      Thanks for your input.
      I have given example assuming that sale of fixed assets is on cash basis. Yes you are right, that Journal voucher is a non cash voucher and that is why when you receive cash, it must be debited to receipt voucher. If you are selling your assets on a credit base, then the same will be entered through a Journal Entry.

  • ALI

    Hi, Sir

    If you dont mind Can u read the example again, i just wanna clarify my doubt, how its come loss on sale of fixed when you sold furniture Rs.18000 & purchase before 3 months Rs.15000. I think u made a mistake. Let me know the correct answer.

    Thanks

    • http://www.tallynine.com Mahendra

      Ali,
      You are right. I had a mistake in the above example.
      The query was actually Furniture sold for Rs. 15000 which was purchased for Rs.18000.
      Again the depreciation will be changed accordingly. It will be calculated on Rs18K for 3 months that will come around Rs. 450.
      Similarly other figure will change accordingly.
      Thanks for drawing my attention. I will change it.

      • sansar

        can you explain abount the percentage column in tally like depreciation charged on machinery Rs. 10% p.a. the value of machine Rs. 500000
        i want to next depreciation columin

        • sansar

          how to create pos invoice in tally 9 can you answer

          • http://www.tallynine.com Mahendra

            Sansar,
            Definately I can answer and explain the procedure but only if you mention your Tally.erp 9 serial number. else I can sorry

        • http://www.tallynine.com Mahendra

          Sansar,
          You need to customise it. else wait for some time. it will be available for free in upcoming release of Tally with Fixed Assets module

  • ravi

    Hi, Sir
    Plese give explanation here, here in our fixed asser showing opening balnce rs 244551.00, now we sold the asset rs 200000.00 on 2nd april 2010, pls tell me how can i pass the entries.

    • http://www.tallynine.com Mahendra

      Ravi,
      Thanks for contacting us.
      You might have missed to mention your Tally Serial number which is a MUST condition to get our Free support.

      • sansar

        can you import of tally’s data from one company to another .

  • b.d.pandey

    how i do fixed assets in credit entrie

    • sansar

      we can entries in fixed assets in the case of lost by fire

  • sansar

    how to interest calculate in tally. in calander year
    eg. loand is rs. 100000 and it’s interest % is Rs. 2% per year calculated the 5 years interest by upwardrounding method.

    • http://www.tallynine.com Mahendra

      Sansar,
      I do not provide any support without knowing the Tally serial number

  • NISARG

    PURCHASE 1,180 SALE 1,478
    INDIRECT EXP 209
    NET PROFIT 89

    CURR.LIA 57 CURR.ASS 604
    P & L 89
    DIFF.IN OP.BAL.458

    TOTAL 604 TOTAL 604

    HOW TO FINALISE THIS ACCOUNT?

  • MONIKA

    sir, i have 1 question.
    i have received a credit note as a discount
    from vendor against monthly purchase scheme.how i treated that in tally erp9.

  • Sathish

    Dear Sir,

    I have one quetion
    We sold fixed asset (car) for cash
    how the entry will come . Please guide me ?

  • Sathish

    Dear Sir,

    I have one quetion
    We sold fixed asset (car) for cash
    how the entry will come . Please guide me ?
    How to enter in tally 9 ?

  • chencho

    sir
    this is my request to kindly help me for tally transaction keys to use

  • asmat

    hello sir i have one question
    how to add the debtors balance in services company

    • http://www.tallynine.com Mahendra

      Asmat,
      This is very difficult to understand your query

  • RUPESH SHAH

    How can we treat when we make a sales of asset exciseable ? Party need modvat credit so we have to give Excisable invoice.

  • althaf

    Send me more accounts knowledge with PDF file

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