No profit or loss from sale of fixed asset goes into income statement while the cash proceeds goes to cash book.
fixed assets are those assets which are not intended to sale. If we sell those assets then our business will not survive.
Fixed assets are the assets of business concern. The value of these assets, except land, gets depreciated year by year and the allowance of such depreciation is availed for tax exemption purposes on a regular basis. When such the assets are sold for a consideration, it is called the "sale of fixed assets" and the gain / loss on sale of such assets is assessed based on the written down value as on the date of such transaction.
annual provision made for the replacement of assets
Loss on sale of land is added back to net income in operating activities and sale of land is shown under investing activity as a reduction in amount.
1. Contribution approach income statement is different from simple income statement in this sense that in contribution margin approach variable costs are deducted from revenues to find out how much any sale of unit of product is contributing towards recovery of fixed cost of product.
This is for any operational asset Debits New asset(fair value) Accumulated depreciation(account balance of old asset) Boot(cash received if any) Loss(if any) Credits Old asset (Account balance, NOT BV) Cash paid(if any) Gain(if any)
Replacement of fixed assets means to sale out the old assets and acquire a new one or replace old piece of asset with new one in exchange with same vendor.
Proceeds from disposal of assets is equal to = Total cost of disposed assets- Accumulated depreciation related to assets disposed+ Profit on sale of fixed assets
Capital income can be defined as the income that a person or business makes from the sale of their capital investment assets.
Fixed assets are the assets of business concern. The value of these assets, except land, gets depreciated year by year and the allowance of such depreciation is availed for tax exemption purposes on a regular basis. When such the assets are sold for a consideration, it is called the "sale of fixed assets" and the gain / loss on sale of such assets is assessed based on the written down value as on the date of such transaction.
It is added back in because it is an accounting expense, not a cash expense. So when you break down a Statement of cash flows you have three parts; Cash flow from operating activities (Think selling of goods), cash flow from investing activities (Think fixed assets) and cash flow from financing activities(Getting a loan, or issuing stock). We depreciate fixed assets (except for land, unless we are taking into account something like the amount of coal in coal mine). However like stated before, depreciation isn't a cash expense and if we look at an Income Statement we see that depreciation is one of the first things subtracted from the Income Statement balance and skews the Income statement. Hence the Statement of Cash Flows. So again, just think of it this way; it was money that was never really spent, so we need to add it back in. Hope you are able to see what I'm getting at, sorry if I made it hard to follow or was to redundant.
The Income Statement deals only with revenues and expenses. The Cash Flow Statement includes any form of cash flow, be it revenues, expenses, the sale or purchase of assets, payment or proceeds from liabilities, etc etc.. Hence the income statement does not provide a complete picture of the entity's cash activities. Does this make sense? If it doesn't, drop me a line :) Happy study!