Question

If it is sold at the end of its useful life, the amount realised on account of the sale of asset as scrap should be credited to ________.

• A. The liabilities account
• B. The asset account
• C. The profit & loss account
• D. The trading account

Answer 1

The correct option is B The asset account

If it is sold at the end of its useful life, the amount realised on account of the sale of asset as scrap should be credited to the asset account and the balance is transferred to profit and loss account.

1. Related journal entries

1) For sale of asset as scrap

Bank A/C Dr.

To Profit and Loss A/C

2) For transfer of balance in asset account

a) In case of profit

Asset A/C Dr.

To Profit and loss A/C

b) In case of loss

profit and loss A/C

To Asset A/C