JOURNAL ENTRIES FOR EXCHANGE OF ASSET FOR PROFIT OR LOSS

Journal entry for purchase of Asset (Exchange) for loss

               Machinery   A/C                           Dr     8600

Excise Duty received (50%) A/C    Dr       700

Excise duty receivable (50%) A/C  Dr       700

               Loss on Exchange of machinery A/c Dr     500

                                To Sundry Creditor A/C                         9500

                                To old Machinery A/C                            1000

(Narration:- Being Machinery Purchased on credit against bill no:01)

The rules for passing Journal Entry

Debit

Machinery (Fixed Asset) is coming into business. There is increase in fixed asset.

As per Real account rule (machinery) “Debit what comes into business"

Debit

As we are paying duties on purchase are eligible for Input credit and treated as asset.(I.e. the taxes paid to creditors are not expense and it has to be treated as asset and can be set off against the duties payable, But before treating it as asset the input eligibility should be checked. Normally the purchase related to manufacture Except Factory building items Ex-Cement& steel can be availed as Input credit)Ex: - EXCISE DUTY, VAT & SERVICE TAX.

As per Real account rule (Excise Duty received (50%)) "Debit what comes into business"(Current Assets)

As per excise CENVAT rules the excise on machinery which is eligible can be availed by the business in two parts first 50% in the year of purchase and the balance 50% in the next year.

Debit

The balance 50 percent will be treated as receivable and used to set off against excise duty payable in the beginning of next year

Ex: - EXCISE DUTY, VAT & SERVICE TAX.

As per Real account rule (Excise Duty receivable (50%) "Debit what comes into business"(Current Assets)

Debit

Loss on exchange will be treated as expense and it will be shown on debit side of profit and loss account at the year end.

As per nominal account rule(Loss on sale ) “Debit all expense or losses"

Credit

Due to credit purchase we are liable to him. And he is giving us the goods on credit.The creditors balance will increase.

As per personal account rule(sundry Creditor) "Credit the giver account"(Current Liabilities)

Credit

Due to exchange there is decrease in fixed asset. So the fixed asset is credited.

As per Real account rule (old machinery)“Credit what goes out of business"(Asset)

Journal entry for purchase of Asset (Exchange) for profit

               Machinery (WIP) A/C                      Dr     8600

Excise Duty received (50%) A/C      Dr       700

Excise duty receivable (50%) A/C    Dr       700

                                       To Sundry Creditor A/C            7500

                                       To old Machinery A/C               1000

                                       To Profit on sale of Machinery   1500

(Narration:- Being Machinery Purchased on credit bill no:01)

The rules for passing Journal Entry

Debit

Machinery (Fixed Asset) is coming into business. There is increase in fixed asset.

As per Real account rule (machinery) “Debit what comes into business"

Debit

As we are paying duties on purchase are eligible for Input credit and treated as asset.(I.e. the taxes paid to creditors are not expense and it has to be treated as asset and can be set off against the duties payable, But before treating it as asset the input eligibility should be checked. Normally the purchase related to manufacture Except Factory building items Ex-Cement& steel can be availed as Input credit)Ex: - EXCISE DUTY, VAT & SERVICE TAX.

As per Real account rule (Excise Duty received (50%)) "Debit what comes into business"(Current Assets)

As per excise CENVAT rules the excise on machinery which is eligible can be availed by the business in two parts first 50% in the year of purchase and the balance 50% in the next year.

Debit

The balance 50 percent will be treated as receivable and used to set off against excise duty payable in the beginning of next year

Ex: - EXCISE DUTY, VAT & SERVICE TAX.

As per Real account rule (Excise Duty receivable (50%) "Debit what comes into business"(Current Assets)

Credit

Due to credit purchase we are liable to him. And he is giving us the goods on credit.The creditors balance will increase.

As per personal account rule(sundry Creditor) "Credit the giver account"(Current Liabilities)

Credit

Due to exchange there is decrease in fixed asset. So the fixed asset is credited.

As per Real account rule (old machinery)“Credit what goes out of business"(Asset)

Credit

Profit on exchange will be treated as gain and it will be shown on credit side of profit and loss account at the year end.

As per nominal account rule (profit on sale ) “Credit all income or gain"