What is the Journal Entry for Profit on Sale of Fixed Assets?

Journal Entry for Profit on Sale of Fixed Assets

Nowadays, businesses sell their assets as part of strategic decision-making. Sale of an asset may be done to retire an asset, funds generation, etc. Such a sale may result in a profit or loss for the business. In the case of profits, a journal entry for profit on sale of fixed assets is booked.

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

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

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

  1. Asset being sold
  2. Cash being received
  3. Profit earned on the 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

 

Short Quiz for Self-Evaluation

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