How to Calculate Balancing Allowance, Balancing Charge & Capital Gain?

How to Calculate Balancing Allowance, Balancing Charge & Capital Gain?

The calculating balancing allowance, balancing charge and capital gain the terms are most import to know every commerce background student.

A balancing allowance is a type of capital allowance which can be given under several of the allowance codes when an asset is disposed of or the business comes to an end.

SI #Cost Price $WDV $Sales Proceeds $AmountComment
A) $ 90,000.00 $ 60,000.00 $ 50,000.00 $10,000.00  Balancing Allowance
Balancing Allowance

A balancing charge is the opposite of a capital allowance, which reduces the amount of profit you have to pay tax on.

SI #Cost Price $WDV $Sales Proceeds $AmountComment
A) $ 90,000.00 $ 60,000.00 $ 50,000.00 $10,000.00  Balancing Allowance
B) $ 90,000.00 $ 70,000.00 $ 80,000.00 $(10,000.00)   Balancing Charge, Capital Gain Nill
Balancing Charge

Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period.

SI #Cost Price $WDV $Sales Proceeds $AmountComment
A) $ 90,000.00 $ 60,000.00 $ 50,000.00 $10,000.00  Balancing Allowance
B) $ 90,000.00 $ 70,000.00 $ 80,000.00 $(10,000.00)   Balancing Charge, Capital Gain Nill
C) $ 90,000.00 $ 70,000.00 $100,000.00 $(30,000.00)Balance Charge, Capital Gain $10,000.00 ($100000-$90000)
A)Bank (Sales) $ 50,000.00
Accu. Dep.90000-60000 $ 30,000.00
Loss on Sales $ 10,000.00
Machinery $ 90,000.00
B)Bank (Sales) $ 80,000.00
Accu. Dep.90000-70000 $ 20,000.00
Machinery $ 90,000.00
Gain on Sales $10,000.00
C)Bank (Sales) $100,000.00
Accu. Dep.90000-70000 $ 20,000.00
Machinery $ 90,000.00
Gain on Sales $ 30,000.00
Balancing Charge $30,000.00 but Maximum is $20,000.00

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