Help!!!! Disposals

Rune

Has anyone got an idiots guide to disposals?

DaveIOW

Rune wrote: »

Has anyone got an idiots guide to disposals?

Try this link & look for lesson on disposals. I haven't watched this one in particular but they are usually quite good.

http://www.aat.org.uk/elearning/rt_unit5_fra/

Rune

OK will do thanx.....

DaveIOW

Let me know if it doesnt help

DaveIOW

Ok thought id stick an explanation in before I start my next exam paper!

Disposals is a way of removing a fixed asset from the accounts. In the accounts the fixed asset is represented by an original cost say £10000 which is a debit on the balance sheet it is also represented by how much it has been used in the accumulated depreciation account which we will say is £5000 this is a credit on the balance sheet. Now say we sold the asset for £4500.

The Disposal account is now used as we have got rid of the physical asset so now we need to get rid of it in the accounts, ie take all its representations out. Of course being double entry everything needs to balance.

So take the original cost out of the balance sheet:

Cr Asset at cost £10000
Dr Disposal £10000

Now take out the accumulated depreciation:

Dr Accumulated depreciation £5000
Cr Disposal £5000

now add in the money received for it

Dr Bank £4500
Cr Disposal £4500

So now the disposal account looks like

Dr £10000
Cr £9500

everything needs to balance so the remaining £500 needs to be added as a credit & this is then a loss on disposal as we didn't match up the £10000 on the credit side

If we had got £5500 for the asset when it was sold then that would be reversed and a £500 credit (income) goes to the P&L

Rune

This is wot i failed on in june.... So I am getting stressed over it... so any and all help is greatly appreciated....

DaveIOW

Does my explanation help? sorry I was editing it when you posted

Rune

yes it does... its just trying to remember it all.... I do know it i just cant remember it....

DaveIOW

well theres 3 things to remember

1) Asset at cost
2) Accumulated Depreciation
3) How much it was sold for

the 1st one is always a debit & the next 2 always a credit, balance it and what you have left over is either a profit or loss

Rune

That makes perfect sense thank you so much!:001_smile::thumbup:

DaveIOW

no worries, good luck

Rune

Thanx second time lucky?! You too, wot are you revising for?

DaveIOW

Rune wrote: »

Thanx second time lucky?! You too, wot are you revising for?

FRA & ECR feeling ok about them now, just want to get them done :001_rolleyes:

Rune

I passed ECR in june..... I found it easy compared to FRA!! But when I look back at it i should have passed ..but i lost theplot and failed section two... I was gutted ....

Pinkjo

I have a question on disposals (well sort of). How do you account for a fixed asset that has been fully depreciated, but you are still using it. For example you depreciated a computer over 3 years, but it is still being used daily.

DaveIOW

Pinkjo wrote: »

I have a question on disposals (well sort of). How do you account for a fixed asset that has been fully depreciated, but you are still using it. For example you depreciated a computer over 3 years, but it is still being used daily.

You dont really account for it, the cost & its accumulated depreciation are still on the balance sheet. You dont depreciate it any more simple as that. You only remove the cost & accumulated depreciation when you get rid of the asset, then use a disposal account which should just be balancing entries either side

Pinkjo

Thanks!