Here are Realized Gain Journal Entry. A realized gain occurs when an asset is sold for more than its carrying amount (book value) on the balance sheet. Recording this gain accurately is essential for reflecting the correct financial performance of the company.
Example Scenario
Let’s assume Company A sells a piece of machinery for ₹1,50,000 on 01-09-2024. The carrying amount of the machinery on the balance sheet is ₹1,00,000. Therefore, the realized gain on the sale is ₹50,000 (₹1,50,000 – ₹1,00,000).
Journal Entry to Record the Sale and Realized Gain
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 01-09-2024 | Cash | 1,50,000 | Cash received from sale of machinery | |
| 01-09-2024 | Depreciation | 1,00,000 | Removing accumulated depreciation | |
| 01-09-2024 | To Machinery | 1,00,000 | Removing the machinery cost | |
| 01-09-2024 | To Realized Gain on Sale | 50,000 | Recording the realized gain |
Explanation:
- Cash (Debit): This increases the cash account, reflecting the receipt of cash from the sale.
- Accumulated Depreciation (Debit): This removes the accumulated depreciation related to the machinery from the books.
- To Machinery (Credit): This removes the cost of the machinery from the asset account.
- To Realized Gain on Sale (Credit): This increases the income account, recording the realized gain from the sale.
Conclusion
Recording realized gains accurately is essential for reflecting the correct financial performance of the company. This ensures that the financial statements present a true and fair view of the company’s profitability.