Disposals

[KILSBYL]

Please, please, please can someone out there help? I am really struggling with this. Is there an easy way to remember what goes where!!!

[jigga]

You would normally Debit the cost of the asset being Disposed of ,Credit the Provision for Depreciation and Credit the Selling Cost of the asset.The difference would be a Profit or Loss ( Profit on the DR. side/Loss on the CR. side) this goes to the P & L A/C. Always remember that Assets are DR. balances and since the Depreciation is being less from the asset for each month or year you CR. the amount, also because the asset is being sold you would CR. the Selling cost.

[Andy]

Think of the two things you are doing:<BR><BR>First, you want to remove the asset from the accounts (as you no longer have it). Remove the original cost from the cost account ( credit this account and debit to disposals) and the depreciation provided to date from the provision for depreciation account (debit this account and credit disposals).<BR><BR>Now you have a debit balance in the disposals account which is the net book value, and must be matched with the proceeds. So the proceeds must be credited to the disposals account (debit bank/cash).<BR><BR>The final balance on the disposals account represents the profit or loss on disposal.<BR><BR>Hope that helps.

[Melanie]

Say the asset being disposed of is £2,000, and has been depreciated £1,500. Selling price is £350.<BR><BR>Debit Accumulated depreciation account £1,500<BR>Credit Fixed asset account £2,000<BR>Credit Disposal of fixed asset (expense) account £350<BR>Debit Disposal of fixed asset (expense) account £850<BR>If the final entry was a credit entry, it would be profit on disposal of fixed asset, here it is a loss.<BR>The first two entries remove the asset being disposed from the fixed asset accounts, the last two deal with any money received for the asset, and whether a profit or a loss is made.<BR><BR>Hope this helps ;)

[bryan]

<br><br><< <i>Say the asset being disposed of is £2,000, and has been depreciated £1,500. Selling price is £350.<BR><BR>Debit Accumulated depreciation account £1,500<BR>Credit Fixed asset account £2,000<BR>Credit Disposal of fixed asset (expense) account £350<BR>Debit Disposal of fixed asset (expense) account £850<BR>If the final entry was a credit entry, it would be profit on disposal of fixed asset, here it is a loss.<BR>The first two entries remove the asset being disposed from the fixed asset accounts, the last two deal with any money received for the asset, and whether a profit or a loss is made.<BR><BR>Hope this helps ;)</i> >><br><br><BR><BR><BR><BR>There is something wrong here, the result above is a loss of £150. This is the difference between NBV of £500 and proceeds of £350.

[Melanie]

<br><br><< <i>There is something wrong here, the result above is a loss of £150. This is the difference between NBV of £500 and proceeds of £350.</i> >><br><br><BR><BR>But at least I got the entries the right way round this time :)<BR><BR>Anyway, it was just to give the idea of how it worked - I'm saving perfection for papers 3.5-7 :-D<BR><BR><BR>

[Ditti]

Nearly there, Melanie, well done. Few more G & T s should sort it.<BR>Good luck - EFG