Profit on Sale of Fixed Assets in TallyPrime: 3 Steps + Example

1. Understanding the Concept of Profit on Sale of Fixed Assets in TallyPrime

When a fixed asset is sold for a price higher than its book value (original cost minus accumulated depreciation), a profit is realized.

This profit needs to be recognized in your financial records.

2. Steps to Record the Profit on Sale of Fixed Assets in TallyPrime:

1. Create a Sales Invoice:

• Go to Gateway of Tally > Vouchers > Press F8 (Sales).
• Enter the buyer’s details.
• Add the fixed asset to the invoice, specifying the selling price.

2. System Calculation:

• TallyPrime will automatically calculate the net book value of the asset based on its original cost and accumulated depreciation.
• It will also calculate the profit or loss on the sale.

3. Record the Journal Entry:

• TallyPrime will generate a journal entry to record the sale:
  • Debit: Sales Account (for the selling price)
  • Credit: Fixed Asset Account (for the net book value)
  • Credit: Profit and Loss Account (for the profit amount)

3. Example of Recording Profit on Sale of Fixed Assets in TallyPrime:

Suppose you purchased a machine for Rs. 10,000. After 2 years of depreciation, its book value is Rs. 8,000. You sell the machine for Rs. 12,000.

1. Create a Sales Invoice:

• Enter the buyer’s details.
• Add the machine with a selling price of Rs. 12,000.

2. System Calculation:

• TallyPrime will calculate the net book value as Rs. 8,000.
• It will also calculate the profit as Rs. 4,000 (selling price – net book value).

3. Journal Entry:

• Debit: Sales Account – Rs. 12,000
• Credit: Fixed Asset Account – Rs. 8,000
• Credit: Profit and Loss Account – Rs. 4,000

4. Key Points:

1. Accumulated Depreciation:

Ensure that the accumulated depreciation for the fixed asset is up-to-date.

2. Tax Implications:

Consider any applicable taxes on the sale of the fixed asset.

3. Financial Reporting:

The profit on the sale of the fixed asset will be reflected in your income statement.

By following these steps, you can accurately record the profit on the sale of fixed assets in TallyPrime, ensuring that your financial records are up-to-date and compliant with accounting standards.