Journal Entries For Sale of Fixed Assets

The company may sell its assets before the end of asset’s lifetime due to the lesser performance of that assets. Due to technological advancement, a company may obsolete quickly. Sale of fixed assets is the strategic decision of the management, and management has to calculate Equivalent Annual Cost when the assets have to dispose of, or when the Replacement of assets is made.

Sale of assets may produce profit and loss for the company. When the business makes profits be selling fixed assets, a journal entry in the name of ” Profit on sale of fixed assets to be booked and the assets which are sold to be omitted from “Fixed Assets Register.”

Usually, the assets may be sold in current value, or more/less than at a current value. When the assets are sold for than its written down value, the profits arising from it will be treated as profits for the company. This profits can be allocated as Revenue Profit and Capital profits for the tax purpose. When the assets are sold less than its written down value, it will incur the loss of the company.

Both loss or profit on the sale of fixed assets to be shown on the Income Statement.

There are 3 different accounts that will be affected in this case;

  1. Assets to be reduced
  2. Cash being received
  3. Profit/Loss may occur in the sale of an asset

The Journal Entry in the Sale of Assets is :

Cash A/cdebitReal AccountCash Received for Asset Sale
To, Sale of AssetsCreditReal AccountReduction of Assets value
To, Profit on sale of Fixed AssetsCreditNominal AccountGain from sale of assets

Journal Entries for Sale of Fixed Assets

  1. When the Assets is purchased:

Fixed Assets A/cDebitReal-account
Cash AccountCreditReal Account

(Being the Assets is purchased)

 2. When Depreciation is recorded:

Depreciation Expenses A/cDebitNominal A/c
Accumulated Depreciation A/cCreditReal A/c

(Being the Depreciation is Charged against Assets)

 3. When Gain is made on the sale of Fixed Assets:

Cash A/cDebitReal A/c
Accumulated Depreciation A/cDebitReal A/c
To, Fixed Assets A/cCreditReal A/c
to, Gain on Sale of Fixed AssetsCreditNominal A/c

( Gain = Sales value – Written Down Value)

(Written Down Value = Original Cost – Accumulated Depreciation).

4. The loss incurred on the Sale of Fixed Assets:

Cash A/cDebitReal A/c
Accumulated Depreciation A/cDebitReal A/c
Loss on disposal of fixed assetsDebitNominal A/c
To, Fixed Assets A/cCreditReal A/c

( Loss = Sales value is lesser than written down value)

(Written Down Value = Original Cost – Accumulated Depreciation).

5. When the Assets is Written off:

Accumulated Depreciation A/cDebitReal A/c
Loss on Sale A/cDebitNominal A/c
Fixed Assets A/cCreditReal A/c