Journal Entry for Profit on Sale of Fixed Assets

Nowadays, businesses sell their assets as a part of strategic decision-making. Reasons could vary from upgradation to a new better quality asset, arranging money for a business need, not in use asset etc. there could be any reason to sell an asset.

It is very common that an asset may not be sold at a current book value, hence if it is sold for more than its written down value, it generates profit for business and in situation opposite to that, it incurs a loss when it is sold for less.

 

Loss or profit on sale of an asset is to be shown on the appropriate side inside a profit and loss account.

 

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

  1. The asset being sold
  2. The cash being received
  3. Profit earned on sale of an asset

 

Journal Entry for Profit on Sale of Fixed Assets

 Cash A/C  Debit  Real Account  Debit what comes in
   To Sale of Asset  Credit  Real Account  Credit what goes out
   To Profit on Sale of Asset  Credit  Nominal Account  Credit all gains