Documents and accounting for liquidation and sale of fixed assets

Process, procedures, documents for liquidation of fixed assets – transfer of fixed assets as well as how to issue invoices and accounting for liquidation – reduction of fixed assets. fdiinvietnam.com will help you answer through the article below.

I. Legal basis

• Circular 45/2013/TT-BTC;
• Circular 133/2016/TT-BTC;
• Circular 200/2014/TT-BTC.

II. Instructions on procedures and documents for liquidation of fixed assets

1. What is the sale and liquidation of fixed assets?

Liquidation and sale of fixed assets are assets that have recovered enough investment capital, have expired fixed asset depreciation period, or are severely damaged, outdated, or the enterprise wants to sell that asset to replace it with a new asset, or to process it to recover capital.

Distinguish between fixed assets for sale and fixed assets for liquidation as follows:

➤ Fixed assets for sale

Fixed assets for sale are usually fixed assets that are no longer needed or are no longer used effectively.

Example of selling fixed assets: The company previously used a feather stuffing machine to serve production activities, but now it no longer produces feather clothes so it does not need to use it, the company decides to sell the above fixed assets.

➤ Liquidated fixed assets

Liquidated fixed assets are fixed assets that are damaged and can no longer be used, or fixed assets that are technically outdated and no longer meet the requirements of production and business activities.

Examples of liquidation of fixed assets: A crane used for a long time has been seriously damaged and can no longer be used; an old sewing machine is no longer suitable for the production requirements of the enterprise, so the enterprise decides to liquidate the above fixed assets.

>> See more: Accounting and depreciation of used fixed assets.

2. Some regulations on liquidation and sale of fixed assets

➤ Regarding accounting, accounting for fixed asset reduction

Clause 1, Article 38 of Circular 200/2014/TT-BTC and Clause 1, Article 32 of Circular 133/2016/TT-BTC stipulate:

• Fixed assets that have not been fully depreciated (ie have not recovered enough capital) but are damaged and need to be liquidated, the cause and responsibility of the collective or individual must be found to find a way to compensate, and the remaining value of the fixed assets that cannot be recovered or compensated must be compensated by the proceeds from the liquidation of that fixed asset itself. The compensation amount is decided by the enterprise’s leadership;
• If the proceeds from liquidation and compensation are not enough to compensate for the remaining value of the unrecovered fixed assets or the lost value of the fixed assets, the remaining difference in value is considered a loss from liquidation of the fixed assets and is accounted for in other expenses.

Thus, costs and revenues from liquidation and asset compensation activities are accounted for in other costs and revenues.

➤ About procedures for liquidation and sale of fixed assets

Point 3.2 Clause 3 Article 35 Circular 200/2014/TT-BTC and Clause 1 Article 31 Circular 133/2016/TT-BTC stipulate: When there are fixed assets to be liquidated, the enterprise must issue a liquidation decision and establish a Fixed Asset Liquidation Council. The Fixed Asset Liquidation Council is responsible for organizing the liquidation of fixed assets in accordance with the order and procedures prescribed in the financial management regime and preparing a “Fixed Asset Liquidation Record” according to the prescribed form.

Accordingly, when liquidating assets, enterprises need to establish a liquidation council, make a liquidation decision and complete related documents according to regulations.

➤ Regarding depreciation costs while waiting for liquidation and sale of fixed assets

According to Clause 3, Article 5 of Circular 45/2013/TT-BTC, enterprises still need to depreciate and manage fixed assets according to regulations while waiting for liquidation and sale.

3. Liquidation and sale records of fixed assets

➤ In case of liquidation of fixed assets

➤ In case of sale of fixed assets

4. Accounting for fixed asset depreciation

4.1. Cases where it is necessary to liquidate and sell fixed assets

➤ Record depreciation of fixed assets (based on depreciation book to date of asset sale, fixed asset liquidation minutes):

Debit account 214: Accumulated depreciation value of fixed assets;

Debit account 811: Remaining value (take Original price – Accumulated depreciation value);

Credit account 211: Original price of fixed assets.

➤ Accounting for liquidation costs (based on documents reflecting liquidation and sale costs of fixed assets):

Debit account 811: Liquidation and sale expenses;

Debit account 1331: Deductible VAT;

There are accounts 111; 112; 331; 334; 338.

➤ Based on the liquidation invoice, the accountant records:

Debit account 111; 112; 131;

Credit account 711: Negotiated selling price;

Credit account 3331: Output value added tax (if any).

For example: Company X sells a car, the selling price on the invoice is 220,000,000 VND (including 10% VAT). Knowing that this fixed asset has an original price of 300,000,000 VND, fully depreciated 100,000,000 VND. The cost incurred from the sale activity paid in cash is 10,000,000 VND (excluding 10% VAT).

➥ Accounting will be recorded as follows:

– Record decrease in fixed assets:

Debit account 214: 100,000,000 (accumulated depreciation value);

Debit account 811: 200,000,000 (take Original price – Accumulated depreciation);

Credit account 211: 300,000,000 (original price of fixed assets);

– Costs incurred in the sale:

Debit account 811: 10,000,000;

Debit account 1331: 1,000,000;

Credit account 111: 11,000,000.

– Income from sale of fixed assets:

Debt 111, 112, 131: 220,000,000;

Credit account 711: 200,000,000;

Credit account 3331: 20,000,000.

>> See more: How to calculate original price of fixed assets.

4.2. In case of destruction, dismantling, or demolition of fixed assets

According to Clause 1, Article 4 of Circular 45/2013/TT-BTC, in case an enterprise, after purchasing tangible fixed assets such as houses and architectural structures attached to land use rights, demolishes or destroys them for the purpose of new construction, the value of land use rights must be determined separately and recorded as intangible fixed assets if it fully meets the standards prescribed in Point d, Clause 2 of this Article; the original price of newly constructed fixed assets is determined as the original price of the settlement of construction investment projects according to the provisions of the current Investment and Construction Management Regulations. The assets demolished or destroyed are handled and accounted for in accordance with current regulations on liquidation of fixed assets.

So:

➤ Based on the fixed asset reduction record:

Debit account 214: Accumulated depreciation value of fixed assets;

Debit account 811: Remaining value of fixed assets (take Original price – Accumulated depreciation value);

Credit account 211: Original price of fixed assets.

➤ Based on documents reflecting costs of dismantling and destroying fixed assets:

Debit account 811: Cost of dismantling and destroying fixed assets (based on recorded documents);

Debit account 1331: Deductible VAT (based on recorded documents);

There are accounts 111; 112; 331; 334; 338.

>> See more: Accounting for repair and upgrade costs of fixed assets.

5. Issue invoices for liquidation of assets and sale of fixed assets

Pursuant to Article 3, Clause 7 of Circular 26/2015/TT-BTC amending and supplementing Article 16 of Circular 39/2014/TT-BTC, it is stipulated as follows: Sellers must issue invoices when selling goods and services, including cases of goods and services used for promotion, advertising, and samples; goods and services used for giving, donating, exchanging, or paying in lieu of salary to employees (except for goods circulated internally or consumed internally to continue the production process). ➞ When liquidating or selling fixed assets, full invoices must be issued according to regulations.

Fixed asset liquidation tax rate:

• For businesses declaring according to the deduction method: Businesses issue VAT invoices with a tax rate of 10%;
• For businesses declaring using the direct method: Businesses create sales invoices and pay VAT at a rate of 1% of revenue.

For example: Enterprise X declares using the deduction method, liquidates a 7-seat Innova car for 600,000,000 VND, the accountant writes an invoice as follows:

 

III. Frequently asked questions about liquidation and sale of fixed assets