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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Bashir Ajao

Last answered:

13 Mar 2023

Posted on:

08 Mar 2023

Resolved: Profit or Loss on Assets Disposal

in Fundamentals of Financial Reporting / Cash Flows from Investing and Financing activities

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Antoniya Baltova

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Posted on:

13 Mar 2023

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Resolved: Profit or Loss on Assets Disposal

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