Instructions on how to account for liquidation of fixed assets in 2024

Properly accounting for liquidation of fixed assets not only helps ensure the accuracy of accounting books but also helps businesses comply with legal regulations. In this article, 1C Vietnam will guide businesses on how to account for liquidation of fixed assets according to the latest regulations in 2024.

1. Fixed assets and related regulations

Fixed assets play an important role in an enterprise's business operations. Therefore, understanding the regulations related to fixed assets is extremely necessary. Below is basic information about fixed assets and related legal regulations.

1.1 What are fixed assets?

Fixed assets, defined in Circular 45/2013/TT-BTC, are assets of great value, used in many business cycles and not consumed or destroyed during the production process. , to create long-term economic benefits for businesses. Fixed assets include two main groups:

• Tangible fixed assets : land, buildings, machinery, equipment, means of transport,...
• Intangible fixed assets : land use rights, copyrights, trademarks, patents,...

1.2 When do you need to liquidate fixed assets?

After understanding the concept of what fixed assets are, businesses need to know when to proceed with accounting for the sale and liquidation of fixed assets. Below are cases where businesses need to consider accounting for liquidation of fixed assets:

• The property is damaged or no longer usable.
• The asset is no longer suitable for the needs of the business.
• Due to merger, sale or dissolution of the enterprise.

According to the provisions of Circular 133/2016/TT-BTC and 200/2014/TT-BTC:

• Assets that have been fully depreciated but are still in use cannot continue to be depreciated.
• For assets that are not fully depreciated and need to be liquidated, the cause and responsibility must be determined to handle compensation.
• If the amount collected from liquidation or compensation is not enough, the difference is considered a loss and recorded in other expenses.

Note: Assets that are not needed but have not been fully depreciated must be managed and depreciated according to current regulations.

1.3 Procedures and documents for liquidation of fixed assets

The process of accounting for the sale and liquidation of fixed assets plays an important role in the management of enterprise assets. To better understand this process, learn about the procedures and documents needed to effectively liquidate accounting fixed assets.

Procedures for accounting for liquidation of fixed assets :

• To liquidate fixed assets, businesses need to establish a Fixed Asset Liquidation Council when a decision is made.
• The Council is responsible for ensuring the liquidation process is in accordance with regulations and preparing a "Fixed Asset Liquidation Minute" according to the prescribed form.
• The minutes are delivered to the Accounting Department and the fixed asset management unit.

To account for liquidation of fixed assets, a "Minute of liquidation of fixed assets" is required according to the prescribed form. Liquidation documents include:

• Minutes of meetings of the Accounting Fixed Asset Liquidation Council.
• Decision on accounting for liquidation of fixed assets.
• Fixed asset inventory record.
• Minutes of re-evaluation of the value of fixed assets.
• Minutes of liquidation of fixed assets (made in two copies, one copy for the Accounting department for bookkeeping, one copy for the asset management and use department).
• The economic contract on the sale of fixed assets has been liquidated.
• Invoice for sale of fixed assets.
• Minutes of delivery and receipt of fixed assets.
• Minutes of destruction of fixed assets.
• Liquidation.

2. How to account for liquidation of fixed assets in 2024

To help businesses manage assets effectively, below are detailed instructions on the process of accounting for liquidation of fixed assets in different cases according to current regulations in 2024.

2.1 Case 1: Liquidation of fixed assets used for production and business activities

When accounting for liquidation of fixed assets in production and business, accountants follow the following principles:

• For fully depreciated assets, the original value and accumulated depreciation are reduced (Accounts 211 and 214).
• Revenue from liquidation is accounted for in account 711.
• Expenses incurred during the liquidation process are credited to Account 811.
• For assets that have not been fully depreciated, the remaining value is credited to Account 811.

In this case, the Accountant records the following:

• Revenue recognition :
  • Debit Account 111, 112, 131 : Record the total value obtained from liquidation of fixed assets (including VAT).
  • Credit Account 711 : Record liquidation value of fixed assets excluding VAT.
  • Credit Account 3331 : Record the amount of VAT paid if the VAT amount has been separated.
  • Note : In case Account 3331 and Account 711 have not been separated, VAT will be included. Enterprises need to make adjustments when declaring the amount of VAT payable.
• Recording a decrease in fixed assets :
  • Debit Account 214 : Record the accumulated depreciation value of liquidated fixed assets from the beginning of the period to the time of liquidation.
  • Debit Account 811 : Record the remaining value of undepreciated fixed assets (if any).
  • Credit Account 211 : Record original price of liquidated fixed assets.
• Accounting for other costs incurred :
  • Debit Account 811 : Record other costs related to liquidation of fixed assets (for example: transportation costs, dismantling costs, brokerage costs...).

2.2 Case 2: Liquidation of fixed assets for internal use and projects

For fixed assets (fixed assets) formed from non-business funding sources, project funding allocated by the state budget, aid capital, sponsorship capital and used for non-business activities, The accounting for liquidation of fixed assets needs to be carried out in accordance with regulations to ensure accuracy, transparency and compliance with accounting principles.

During the accounting process of internal sale or liquidation of fixed assets or projects, accountants record the following:

• Write down fixed assets :
  • Debit Account 214 : Depreciation value of fixed assets from the beginning of the period to the time of liquidation.
  • Debit Account 466 : Remaining value of undepreciated fixed assets (if any).
  • Credit Account 211 : Original price of liquidated fixed assets.
• Recording income from liquidation of fixed assets :
  • Debit Account 111 or Account 112 : Total value obtained from liquidation of fixed assets.
  • Credit: Account 466 : Capital to form liquidated fixed assets.
  • Credit Account 3331 : Corporate income tax arising from liquidation of fixed assets (if any).
• Record costs arising from liquidation of fixed assets :
  • Debit Account 466 : Total value of expenses incurred during the liquidation of fixed assets.
  • Credit: Account 111 or Account 112 : Expenses arising from liquidation of fixed assets.
• Accounting for other related costs :
  • Other costs incurred during the liquidation of fixed assets are recorded in relevant cost accounts according to the regulations of the accounting system.

2.3 Case 3: Liquidation of fixed assets used for welfare and cultural activities

Revenues and expenses related to liquidation of fixed assets accounted for cultural activities and employee welfare will be recorded in account 353 - Bonus and welfare fund. During the process of accounting for liquidation of fixed assets, accountants record the following:

• Revenue recognition :
  • Debit accounts 111, 112, ... (Total value obtained when liquidating fixed assets)
  • Credit Account 3532 : Welfare fund (Money collected from liquidation of fixed assets used for cultural and welfare activities)
  • Credit Account 3331 : Taxes and amounts payable to the State (CIT amount payable on income from liquidation of fixed assets, if any)
• Reflecting costs incurred :
  • Debit Account 3532 : Total value spent when liquidating fixed assets
  • There are accounts 111, 112, ... (Total value of expenses incurred in the process of liquidating fixed assets)
• Recording a decrease in fixed assets :
  • Debit Account 214 : Depreciated value of fixed assets from the beginning of the period to the time of liquidation
  • Debit Account 353 : Undepreciated remaining value of fixed assets (if any)
  • Credit Account 211 : Original price of fixed assets
• Other cost accounting :
  • Debit Account 353: Other expenses related to liquidation of fixed assets

2.4 Case 4: Liquidation of fixed assets when demolishing fixed assets

According to the provisions of Circular 45/2013/TT-BTC, when an enterprise dismantles or destroys houses and structures after purchasing tangible fixed assets, the value of land use rights needs to be determined separately and recorded as an asset. intangible fixed assets if they meet prescribed standards. The original price of new construction fixed assets is based on the settlement price of construction investment projects according to current regulations. How to record accounting when demolishing fixed assets in this case:

• Debit account 214 "Depreciation of fixed assets" with the depreciation value of demolished fixed assets.
• Debit account 811 "Other expenses" for the remaining value of demolished fixed assets.
• There is account 211 "Tangible fixed assets" with the original cost of the demolished fixed assets.

According to Official Dispatch 2590/TCT-CS dated June 26, 2015 of the General Department of Taxation, the demolition and liquidation accounting of fixed assets such as pedestals and machine foundations are included in reasonable expenses when determining income tax. businesses, with full legal invoices and documents according to the provisions of law.

3. Accurate fixed asset liquidation accounting process

Enterprises need to follow the following process to ensure accuracy and compliance with regulations when accounting for sale and liquidation of fixed assets:

• Step 1 : The department with fixed assets that need to be liquidated makes a request for liquidation, nominates a list of assets that need to be liquidated and is approved by leadership.
• Step 2: Business leaders decide to liquidate fixed assets.
• Step 3 : Establish a Fixed Asset Liquidation Council consisting of representative members from relevant departments, including:
  • Head of unit (chairman of fixed asset liquidation accounting council)
  • Chief accountant and asset accountant
  • Head or deputy head of asset management department
  • Representative of the unit directly managing the assets to be liquidated
  • Property specialist
  • Union representative (if necessary)
• Step 4 : The Council decides on the form of disposal of fixed assets such as sale or destruction, depending on the condition of the asset.
• Step 5 : After liquidation, the Council prepares a "Fixed Asset Liquidation Minute" and a liquidation dossier.

4. Example of accounting for liquidation of fixed assets

On October 2, ABC company sold a laptop for use in the office. Information about the transaction is that the laptop's original price is 25 million VND. The cumulative depreciation value of the laptop is 7 million VND after 5 years of use. The company spent 900,000 VND to upgrade the computer before selling, paid in cash. The laptop is sold for 12 million VND, excluding 10% VAT and not collecting money from customers.

Accounting for liquidation of fixed assets (in VND):

• Reducing the original price of fixed assets :
  • Debit Account 214 : 7,000,000
  • Debit Account 811 : 18,000,000
  • Yes Account 211 : 25,000,000
• Costs related to liquidation of fixed assets are accounted for :
  • Debit Account 811 : 900,000
  • Yes Account 111 : 900,000
• Income from liquidation of fixed assets :
  • Debit Account 111 : 13,200,000
  • Yes Account 333 : 1,200,000
  • Yes Account 711 : 12,000,000

Above are detailed instructions on how to account for liquidation of fixed assets according to the latest regulations in 2024, helping businesses follow the correct process and account accurately, ensuring legal compliance and saving costs. Hopefully, the information 1C Vietnam provides will help businesses better understand how to carry out this accounting process accurately and effectively.