Resolved: Profit or Loss on Assets Disposal
In a situation where we realised profit or loss from the sales of an asset, how should it be accounted for in the Cash Flow Statement?
Hi Bashir,
When a company sells fixed assets at a profit (or loss), this reflects both the Operating and Investing activities in the Cash Flow Statement.
The sale is recorded as follows:
Operating activities:
Add: loss on sale of assets
Less: profit on sale of assets
These are adjustements to the Net Income amount, as the profit/loss of the sale has already been included in Net Income in the Income Statement. So, we have to exclude them in the Cash Flow Statement.
Investing activities:
Add: proceeds from sale of assets
Less: purchases of assets
This is the amount of actual cash received/paid in the transaction.
I hope you find this helpful. Please let us know if you have any other questions.
Best,
The 365 Team
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