What is the journal entry for sale of asset?

An asset is an item of property owned by a company/business. It may be for a longer or shorter period of time. Assets are classified into two broad heads:

1. Non-Current Assets
2. Current Assets

The asset may be sold for several reasons such as:

1. An asset is fully depreciated.
2. It should be sold because it is no longer needed.
3. It is removed from the books due to unforeseen circumstances.

The journal entry for profit on the sale of assets will be:

According to the golden rules of accounting, in the above entry “Cash/Bank A/c” it is a Real Account and the rule says “Debit what comes in” and so is debited.

“Asset A/c” is a real account and the rule says “Credit what goes out” and so is credited. Any Gain on sale of an asset goes to the Nominal account and according to the rule “Credit, all incomes and gains” and so is credited.

The journal entry for loss on sale of the asset will be:

In the above entry, “Loss on Sale of Asset” is debited because according to Nominal account rules “Debit all losses and expenses” and so is debited.

According to modern rules of accounting, “Debit entry” increases assets and expenses, and decreases liability and revenue, a “Credit entry” increases liability and revenue, and decreases assets and expenses.

For example, Mr. A sold furniture for $2,500 and incurred a loss on the sale which amounted to $2,500.

According to modern rules, the journal entry will be: