Effect of Sale or Discard - Fixed Assets


Brief Summary:


Asset Sale / Discarding

  •  An asset is sold when it is no longer useful, not in working condition or not required 
  • When asset is not in working condition and it cannot be sold, it is discarded and disposed as Scrap. 


Sale transaction as per Companies Act


When an asset is sold / discarded, in accounts:


  •  The gross block (Category) is reduced by cost of asset 
  • Depreciation is calculated till the date of sale. 
  • The Accumulated Depreciation is reduced by the Accumulated Depreciation of the asset sold / discarded 
  • The profit / loss on sale is posted to Profit/Loss on sale of asset 
  •  The profit or loss is calculated as follows : 

             i. Cost of Asset

             ii. Accumulated Depreciation

             iii. Sale Proceeds

             iv. Profit / Loss = A – B –C


Sale transaction as per Income tax Act


  •  As per Income tax Act, the only action done on sale is to reduce the Block to which the asset pertain by the amount of Sale Proceeds 
  • The Block continues to get depreciation till even one asset is present in it


In Detail:



Calculate the Depreciation of Companies Act and Income-Tax Act for F.Y. 2010-2011

Depreciation Calculation – As Per Book for F.Y. 2010-2011:



Depreciation Calculation – Income Tax for F.Y. 2010-2011:



Sale effect on Companies Act:-

Depreciation Calculation – As Per Book for F.Y. 2011-2012:-

Report - Fixed Asset Schedule Books – Category wise:-


(Note: - In companies act cost of sold asset gets reduce from Gross Block and total depreciation (AccDep+Dep) gets reduced from Depreciation Block)


Sale effect on Income-Tax Act:-


Depreciation Calculation – Income Tax for F.Y. 2011-2012:-

Fixed Asset Schedule – Income-Tax Act.


(Note: - In Income tax act Sale price of the sold asset gets reduce from Gross Block)