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Statement of Cash Flows: How to Account for a Disposal of Fixed Assets

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This video shows how to account for the disposal of a fixed asset on the Statement of Cash Flows. The cash proceeds from the sale of the fixed asset are shown as a cash inflow in the cash flow from investing activities section. Any gain or loss recognized on the sale must be removed when adjusting Net Income to cash flow from operating activities to avoid double-counting (the only cash effect is the cash proceeds from the sale; an accounting gain or loss on paper doesn't affect cash). In addition, the accumulated depreciation associated with the fixed asset is removed from the books. These concepts are illustrated in the video with a comprehensive example.-
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Опубликовано:

28 авг 2024

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Комментарии : 33

@Kevin-vx3hg 3 года назад

"That makes sense, but thats not the way its done" the reason I was terrible at this in school, its so counter intuitive

@MyFinancialFocus 2 года назад

I like how we can keep track of the depreciation with the income statement and focus on the cash inflow from the direct sale of property. Cashflow for the win!

@mbalenhlenyathi7600 4 года назад

This video is truly a life saver

@MaryGraceRodilTV 6 лет назад

Thanks for this lecture. Very helpful. You explained it in a way that is really understandable for students like me. Pls. keep it up!

@Standbyualways 2 года назад

I do appreciate for the informative explanation. It helps me to solve my today assignment. Keep up the good work!!

@pesca844 5 лет назад

Thank you, very helpful in my preparation for FAR.

@mubasharmirza8983 2 года назад

Are u a CA student and doing CAF currently?

@lundusimuchenje762 4 года назад

Thank you very much you have saved me

@learnvietstories 3 года назад

thanks. so easy to understand

@Tracks777 7 лет назад

Great content

@Tracks777 7 лет назад

Nice! Keep it up!

@nubmichAeL Год назад

thank you sir

@cynthiahawkins2142 4 года назад

Thank you!!

@TruePromise 7 лет назад

thats great video put can you please make video explain the governmental accounting

@Edspira 7 лет назад

I might not be able to get to governmental and nonprofit accounting until spring 2018. Sorry, I have a large backlog of videos, I wish I had more time!

@TruePromise 7 лет назад

thanks

@natashas5174 4 года назад

Thanks so so helpful!

@qasimmir1838 7 лет назад

Can we say that accumulated depreciation of the disposed off asset becomes depreciation expense for the accounting period? What does standards say about this?

@Edspira 7 лет назад

When you sell a fixed asset you remove the accumulated depreciation that was associated with the asset. Let's assume you bought a machine for $1,000 years ago and had accumulated depreciation of $600 since that time. If today you sell the machine for $500 cash, you would make the following journal entry: Debit Cash $500 Debit Accumulated Depreciation $600 Credit Machine $1,000 Credit Gain on Sale of Fixed Asset $100

@phillipgunter8375 Год назад

Awesome

@Edspira Год назад

Thanks!

@philippeb4972 3 года назад

what about the tax implications on the sale? is there not a tax that needs to eb backed out somewhere?

@Slma3a 5 лет назад

how does a capital loss on the disposition of an asset generate a cash inflow?

@wineblader899 4 года назад

Is this gain from sale (or loss) also included in the cash receipts in the cash flow from operating activites - direct method?

@samkab677 3 года назад

@rebeccawendy4278 Год назад

How can I calculate the 50,000 coming from Proceeds from Sale?🤨

@raccoon874 4 месяца назад

That comes from your income statement - sales less cogs less taxes etc... at the bottom you have net sales or net profit, that's where it comes from.

@samkab677 5 лет назад

Please advise ..what does 41000 represent ? And what 41000 - 37000 represent ?

@pesca844 5 лет назад

Sam, 41000 is a plug. Just a number that will get us to the ending A/D balance of 34000. 41000 - 37000 is nothing...

@mirhasan1880 5 лет назад

Sam Kab 41000 is the depreciation for the whole year, since u begin with the accumulated depreciation 30000 and u end with 340000 however u dr accumulated depreciation by 37000 for particular machine. In that sence u should have a short fall of 7000 in accumulated depreciation but u end with 34000 of accumulated depreciation. There must be (7000+34000) of depreciation expense incurred during the accounting year. As u know whenever depreciation expenses happen accumulated depreciation account has to cr.

@maofamily112 2 года назад

@@pesca844 Beg Accum. Depreciation = 30 000 Ending Accum. Depreciation = 34 000 Difference in Accum Dep. for the year = 4 000 - This is the amount that is left in the accum depreciation account after the accum depre. of the fixed asset (37000) that is sold is removed from accum depreciation account. Therefore: Depreciation expense for the year is calculated: 37 000 (fixed asset that was sold) + 4 000 (difference of accumulated dep. for the year) = 41 000

@qasimmir1838 7 лет назад

Can we say that accumulated depreciation of the disposed off asset becomes depreciation expense for the accounting period? What does standards say about this?

@Edspira 7 лет назад

You would would do a partial month of depreciation in the month that the asset was sold (depending on the sale date). For example, if an machine was sold on Sept 15 then you would only record a half month of depreciation. When you record the sale on 9/15, you would zero-out the accumulated depreciation and asset accounts associated with the machine to completely take the machine off the books and record a gain or loss on the sale of the machine.