Journal Entry for Sale of Building

Journal Entry for Sale of Building

Journal entry for sale of building shall be recorded by crediting the building and debiting the cash. The profit on building sale is credited, while the Gain or loss on sale of building shall be treated accordingly.

Example of Journal Entry for Sale of Building

In this example we explain that what would be the journal entry for sale of building in case only the carrying value of asset and Sale proceed is known. For example carrying amount of a building is 100,000 and the building sold for 120,000, then following entry shall be recorded.

Cash received 120,000 shall be debited, the building (carrying amount) 100,000 shall be credited and difference amounting 20,000 (in this example it is a gain on sale as sales proceeds of exceeds the carrying amount) shall be credited to profit & loss account.

Date	Particular	Ledger Folio	Dr.	Cr.
	Cash		120,000
	Building a/c			100,000
	Profit & loss			20,000

 

Example of Journal Entry for Sale of Building

In this example we would explain, what would be the journal entry in case the information about the cost, accumulated depreciation and sale proceed is available. The cost of building was 140,000 the accumulated depreciation showing a figure of 40,000 was sold for 100,000.

The journal entry for sale of building shall be recorded by debiting the cash received 120,000 and accumulated depreciation of 40,000 and crediting the building original cost i.e. 140,000. The gain on sale (as balancing figure) is also credited.

Date	Particular	Ledger Folio	Dr.	Cr.
	Cash		120,000
	Accumulate Depreciation		40,000
	Building a/c			140,000
	Profit & loss			20,000

In this method the carrying amount of asset was calculated by debiting the accumulated depreciation and crediting the asset at cost (net figure is carrying amount of asset).

Journal Entry for Sale of Building on Loss

The loss or profit on sale is calculated as balancing figure. For example a building purchased for 200,000, accumulate depreciation is 60,000 and building was sold for 80,000, then loss shall be the balance figure and shall be recorded as under;

Date	Particular	Ledger Folio	Dr.	Cr.
	Cash		80,000
	Accumulate Depreciation		60,000
	Profit & Loss (Balance)		60,000
	Building a/c			200,000
			200,000	200,000

The cash and accumulated depreciation was debited in the books of accounts, while the original cost of asset was credited i.e. 200,000. The total debit was 140,000 (before loss entry) and total credit was 200,000. Thus the balancing amount of debit side shall be debited as loss on sale.