08-13-2009, 04:40 AM
Gain / loss on the sale of asset is a non cash item.
I Just give an example to explain.
Asset Cost = Rs. 100,000
Acc. Dep = Rs. 60,000
Sold for = Rs. 50,000
Now what is Profit here? yes Rs. 10,000
Now What is received in cash ? Yes Rs. 50,000
Cash inflow is Rs. 50,000 but not Rs. 10,000 in other words, cash inflow is the sale proceed but not the profit.Therefore we treat it as non-cash item.
Regards
Waqas
I Just give an example to explain.
Asset Cost = Rs. 100,000
Acc. Dep = Rs. 60,000
Sold for = Rs. 50,000
Now what is Profit here? yes Rs. 10,000
Now What is received in cash ? Yes Rs. 50,000
Cash inflow is Rs. 50,000 but not Rs. 10,000 in other words, cash inflow is the sale proceed but not the profit.Therefore we treat it as non-cash item.
Regards
Waqas