TMI BlogTax treatment of Fixed Assets Written offX X X X Extracts X X X X X X X X Extracts X X X X ..... I want to know whether the amount of Fixed Assets written off is allowed as business loss under Income Tax Act ?? If it's allowed, then what is will be the depreciation on those assets as per Income Tax Act ?? P.S. The assets are destroyed, and can't be used. - Reply By DR.MARIAPPAN GOVINDARAJAN - The Reply = Whether there is any insurance claim for these assets? - Reply By YAGAY and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SUN - The Reply = https://www.accountingtools.com/articles/how-do-i-write-off-a-fixed-asset.html A fixed asset is written off when it is determined that there is no further use for the asset, or if the asset is sold off or otherwise disposed of. A write off involves removing all traces of the fixed asset from the balance sheet, so that the related fixed asset account and accumulated depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account are reduced. There are two scenarios under which you may write off a fixed asset. The first situation arises when you are eliminating a fixed asset without receiving any payment in return. This is a common situation when a fixed asset is being scrapped because it is obsolete or no longer in use, and there is no resale market for it. In this case, reverse any accumulated depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reverse the original asset cost. If the asset is fully depreciated, that is the extent of the entry. For example, ABC Corporation buys a machine for $100,000 and recognizes $10,000 of depreciation per year over the following ten years. At that time, the machine is not only fully depreciated, but also ready for the scrap heap. ABC gives away the machine for free and records the following ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. Debit Credit Accumulated depreciation 100,000 Machine asset 100,000 A variation on this first situation is to write off a fixed asset that has not yet been completely depreciated. In this situation, write off the remaining undepreciated amount of the asset to a loss account. To use the same example, ABC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation gives away the machine after eight years, when it has not yet depreciated $20,000 of the asset's original $100,000 cost. In this case, ABC records the following entry: Debit Credit Loss on asset disposal 20,000 Accumulated depreciation 80,000 Machine asset 100,000 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second scenario arises when you sell an asset, so that you receive cash (or some other asset) in exchange for the fixed asset you are selling. Depending upon the price paid and the remaining amount of depreciation that has not yet been charged to expense, this can result in either a gain or a loss on sale of the asset. For example, ABC Corporation still disposes of its $100,000 machine, but do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es so after seven years, and sells it for $35,000 in cash. In this case, it has already recorded $70,000 of depreciation expense. The entry is: Debit Credit Cash 35,000 Accumulated depreciation 70,000 Gain on asset disposal 5,000 Machine asset 100,000 What if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ABC Corporation had sold the machine for $25,000 instead of $35,000? Then there would be a loss of $5,000 on the sale. The entry would be: Debit Credit Cash 25,000 Accumulated depreciation 70,000 Loss on asset disposal 5,000 Machine asset 100,000 A fixed ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et write off transaction should only be recorded after written authorization concerning the targeted asset has been secured. This approval should come from the manager responsible for the asset, and sometimes also the CFO. Fixed asset write offs should be recorded as soon after the disposal of an asset as possible. Otherwise, the balance sheet will be overburdened with assets and accumulated de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation that are no longer relevant. Also, if an asset is not written off, it is possible that depreciation will continue to be recognized, even though there is no asset remaining. To ensure a timely write off, include this step in the monthly closing procedure. - Reply By DR.MARIAPPAN GOVINDARAJAN - The Reply = Fantastic narration - Reply By YAGAY and SUN - The Reply = Thanks Sir. We are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learning from you by reading the articles written by you. - Reply By Ganeshan Kalyani - The Reply = In my view the amount written off is an admissible expense. Thanks - Reply By ChandraShekhar Keshri - The Reply = Dear YAGAY and SUN The question asked by Monica shetty is tax treatment of Fixed Assets written off - whether written off of fixed assets is allowed as business loss as per inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome tax or not ? But you reply all the facts from basic entry to closing entry but you have not give the answer whether it is allowed business loss as per income tax act. Thanks - Tax treatment of Fixed Assets Written off - Query Started By: - monica shetty Dated:- 3-5-2018 Income Tax - Got 6 Replies - Income Tax - Discussion Forum - Knowledge Sharing, reply post by an expert, personal opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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