When the fixed assets of a business firms are sold and if any loss is made out of the sales proceeds then it will be booked under loss on sale of fixed assets account. Fixed assets, here, we mean the assets against which the deprecation is charged.

For example a machinery was sold for Rs.50000/= and the written down value of the machinery was Rs.60000/=. In this case, there will be a loss for Rs.10000/= and this loss will be shown under loss on sale of fixed assets account.

Accounting Treatment of Loss on Sale of Fixed Assets

a) In case of receipt of cash or cheque for sale proceeds:-

Type of voucher to be prepared:- Cash or Bank Receipt Voucher

Entry to be made

Debit:- Cash Account

or

Bank Account

Debit:- Loss on Sale of Fixed Assets

Credit:- Fixed Assets Account

b) In case of sale of assets on credit:-

Type of voucher to be prepared:- Journal Voucher

Entry to be made

Debit:-  Personal Account of Purchaser

Debit:- Loss on Sale of Fixed Assets Account

Credit:- Fixed Assets Account

Note:- Fixed assets are not trading items. Therefore, no sale voucher will be prepared for sale of fixed assets.

Treatment of Loss on Sale of Fixed Assets in Final Accounts

The loss on sale of fixed assets is shown in debit side of profit and loss account since it is the indirect expenditure.

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