Gain on sale of fixed assets will be considered as which type of activ...
It is an operating activity. this item is subtracted from net profit before tax while calculating cash flow from operating activity. and loss from sale of fixed asset is added.
Gain on sale of fixed assets will be considered as which type of activ...
Gain on Sale of Fixed Assets in Cash Flow Statement
Operating Activities:
- Gain on the sale of fixed assets is not considered an operating activity in the cash flow statement.
- Operating activities are activities that relate to the primary operations of a business, such as sales, purchases, and expenses.
Investing Activities:
- Gain on the sale of fixed assets is reported in the investing activities section of the cash flow statement.
- Investing activities include cash flows related to the acquisition and disposal of long-term assets, such as property, plant, and equipment.
Explanation:
- When a company sells a fixed asset for more than its carrying amount, it results in a gain.
- This gain represents a cash inflow for the company and is reported as a positive amount in the investing activities section.
- The gain on the sale of fixed assets is added to the net income when calculating the cash flows from operating activities to adjust for non-cash items.
Significance:
- The gain on the sale of fixed assets provides insight into the profitability and efficiency of a company's asset management.
- It shows that the company was able to sell the asset at a price higher than its book value, resulting in a positive impact on cash flow.
In conclusion, the gain on the sale of fixed assets is considered an investing activity in the cash flow statement and provides valuable information about a company's financial performance and asset management.
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