While preparing a fixed asset Account, if the balancing figure comes on the credit side, the should it be treated as depreciation or sale of fixed asset? Why?
Topic - Calculating cash flow from investing activities.
While preparing a fixed asset Account, if the balancing figure comes on the credit side, the should it be treated as depreciation or sale of fixed asset? Why?
Topic - Calculating cash flow from investing activities.
In Cash Flow Statement, when there is a decrease in balance of fixed asset from previous year to current year in that case it is treated as Sale of asset (Cash Inflow from Investing Activity). On the contrary, if there is an increase in balance of fixed asset from previous year to current year in that case it is treated as Purchase of asset (Cash Outflow from Investing Activity). Depreciation is treated as Non Cash Expense in Cash Flow Statement and is therefore added to Net profit after taxation and Extraordinary Items under Cash Flow From Operating Activities.
Also, while preparing asset account after transferring all relevant transactions relating to opening balance, closing balance, depreciation, loss/gain on sale of asset any balance that appears on the debit side is treated as Purchase (To Cash) and Any balance that appears on the credit side is treated as Sale (By Cash).
In Cash Flow Statement, when there is a decrease in balance of fixed asset from previous year to current year in that case it is treated as Sale of asset (Cash Inflow from Investing Activity). On the contrary, if there is an increase in balance of fixed asset from previous year to current year in that case it is treated as Purchase of asset (Cash Outflow from Investing Activity). Depreciation is treated as Non Cash Expense in Cash Flow Statement and is therefore added to Net profit after taxation and Extraordinary Items under Cash Flow From Operating Activities.
Also, while preparing asset account after transferring all relevant transactions relating to opening balance, closing balance, depreciation, loss/gain on sale of asset any balance that appears on the debit side is treated as Purchase (To Cash) and Any balance that appears on the credit side is treated as Sale (By Cash).
