Journal Entries For Sale of Fixed Assets

Assets eliminate from accounting records when it is sold. Asset disposal may require the recording of a gain or loss on the transaction in the reporting period when the disposal occurs.

The journal entries of asset disposal is to reverse both the recorded cost of the fixed c

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

The sale of assets may produce profit and loss for the company. When the business makes profits by 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 then its written down value, the profits arising from it will be treated as profits for the company. These profits can be allocated as Revenue Profit and Capital profits for tax purposes. When the assets are sold less than their written down value, it will incur the loss of the company.

Both loss or profit on the sale of fixed assets are 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/c	debit	Real Account	Cash Received for Asset Sale
To, Sale of Assets	Credit	Real Account	Reduction of Assets value
To, Profit on Sale of Fixed Assets	Credit	Nominal Account	Gain from sale of assets

Journal Entries for Sale of Fixed Assets

  1. When the Assets is purchased:

Fixed Assets A/c	Debit	Real-account
Cash Account	Credit	Real Account

(Being the Assets is purchased)

 2. When Depreciation is recorded:

Depreciation Expenses A/c	Debit	Nominal A/c
Accumulated Depreciation A/c	Credit	Real A/c

(Being the Depreciation is Charged against Assets)

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

Cash A/c	Debit	Real A/c
Accumulated Depreciation A/c	Debit	Real A/c
To, Fixed Assets A/c	Credit	Real A/c
to, Gain on Sale of Fixed Assets	Credit	Nominal 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/c	Debit	Real A/c
Accumulated Depreciation A/c	Debit	Real A/c
Loss on disposal of fixed assets	Debit	Nominal A/c
To, Fixed Assets A/c	Credit	Real 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/c	Debit	Real A/c
Loss on Sale A/c	Debit	Nominal A/c
Fixed Assets A/c	Credit	Real A/c