There are lots of fixed assets in every type of business. All are recording in the books of accounts through journal entries. After passing journal entries, each fixed asset account is prepared in ledger accounts. To record debits and credits of each asset account is important.
1. Debits of Fixed Asset Account
All asset accounts’ debit side, we will show the amount of asset. If we pay cash for buying any fixed asset, we will debit cash account in the fixed asset account. For example, we have paid cash for buying office vehicle Rs. 5,00,000, for buying office furniture Rs. 50,000, for buying equipment Rs. 60000. In Office Vehicle account, we will show Rs. 500000 in its debit side with cash account. In Office Furniture account, we will show Rs. 50000 in its debit side with cash account. In Equipment Account, we will show Rs. 60000 in its debit side with cash account. If we pay for buying any other fixed asset, we will open other new fixed asset account and same bought amount will show in its debit side.
Important : If you have bought any new fixed asset whose account is already exist, you should not open any new account, just again debit the amount of new bought fixed asset in already existed account. For example, you have bought again new furniture of Rs. 10,000. But we have already furniture account, now, only debit cash account with Rs. 10,000 in already existed furniture account.
2. Credits of Fixed Asset Account
At the end of year, you should credit the fixed asset account with depreciation account. With this, closing balance will show the current value of fixed asset. In every fixed account, we show depreciation account. Depreciation is calculated with different methods of depreciation.
Important : Sometime, we sell the fixed asset, at that time, cash account will credit with sold value in the fixed asset account. Value of depreciation of sold asset will also credit in same fixed asset account. Profit or loss on sale of fixed asset will be treated following way
If profit on the sale of fixed asset, it will be debited in fixed asset account with name of profit and loss account.
If there is loss on the sale of fixed asset, it will be credit in fixed asset account with the name of profit and loss account.
1. Debits of Fixed Asset Account
All asset accounts’ debit side, we will show the amount of asset. If we pay cash for buying any fixed asset, we will debit cash account in the fixed asset account. For example, we have paid cash for buying office vehicle Rs. 5,00,000, for buying office furniture Rs. 50,000, for buying equipment Rs. 60000. In Office Vehicle account, we will show Rs. 500000 in its debit side with cash account. In Office Furniture account, we will show Rs. 50000 in its debit side with cash account. In Equipment Account, we will show Rs. 60000 in its debit side with cash account. If we pay for buying any other fixed asset, we will open other new fixed asset account and same bought amount will show in its debit side.
2. Credits of Fixed Asset Account
At the end of year, you should credit the fixed asset account with depreciation account. With this, closing balance will show the current value of fixed asset. In every fixed account, we show depreciation account. Depreciation is calculated with different methods of depreciation.
Important : Sometime, we sell the fixed asset, at that time, cash account will credit with sold value in the fixed asset account. Value of depreciation of sold asset will also credit in same fixed asset account. Profit or loss on sale of fixed asset will be treated following wayIf profit on the sale of fixed asset, it will be debited in fixed asset account with name of profit and loss account.
If there is loss on the sale of fixed asset, it will be credit in fixed asset account with the name of profit and loss account.
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