Fixed Assets are treated as Real Accounts in Accounting therefore When Fixed Assets are purchased they are debited and when fixed asset are sold they are credited in Accounting.
Fixed Assets are also Assets in Accounting and as per Accounting law when Fixed assets added in business they are debited and when fixed assets are deducted they are credited in business accoutning.
Example of journal entry of Fixed assets exchange in Business.
Journal entry for exchange of old machinery
Example :
Purchase Machinery Rs 100000 from Mohan Brothers in exchange of old machinery Rs 40,000 whos book Value Rs 50,000.
Make journal entry of the above transaction
Here we are puchasing one machinery in exchanging of old machinery hence machinery purchased will be debited as that machinery is added to the business wheras old machiery will be credited as its exchange with new machinery and its going our of business.
The point to be noted we have given two cost of old machiney one its book value and the other its sale value but while making journal entry we have to take its book value under consideration.
The journal entry for the same will be:
Machinery A/c Dr. | 100000 |
P/L A/c Dr | 10,000 |
To old Machinery A/c | 50,000 |
To Mohan Brother | 60,000 |
(being machinery purchased in exchange of old machinery) | |
As we have to make the profit and loss accounts because we have sold that machinery with a value of 40,000 whereas its book value is 50,000..
This 10,000 is a loss in the books of accounts hence loss is debited as per the rule of nominal accounts that’s why loss is debited here.
Profit on sale of Assets in Journal Entry
Purchase Machinery Rs 100000 from Mohan Brothers in exchange of old machinery Rs 60,000 whos book Value Rs 50,000.
Here
|
Machinery A/c Dr. |
100000 |
|
To P/L A/c |
10,000 |
|
To old Machinery A/c |
50,000 |
|
To Mohan Brother |
40,000 |
|
(being machinery purchased in exchange of old machinery) |
|