Help!!!! Disposals

Rune
Rune Feels At HomeRegistered Posts: 91
Has anyone got an idiots guide to disposals?

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  • DaveIOW
    DaveIOW Feels At Home Registered Posts: 85
    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
    Rune Feels At Home Registered Posts: 91
    OK will do thanx.....
  • DaveIOW
    DaveIOW Feels At Home Registered Posts: 85
    Let me know if it doesnt help
  • DaveIOW
    DaveIOW Feels At Home Registered Posts: 85
    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
    Rune Feels At Home Registered Posts: 91
    This is wot i failed on in june.... So I am getting stressed over it... so any and all help is greatly appreciated....
  • DaveIOW
    DaveIOW Feels At Home Registered Posts: 85
    Does my explanation help? sorry I was editing it when you posted
  • Rune
    Rune Feels At Home Registered Posts: 91
    yes it does... its just trying to remember it all.... I do know it i just cant remember it....
  • DaveIOW
    DaveIOW Feels At Home Registered Posts: 85
    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
    Rune Feels At Home Registered Posts: 91
    That makes perfect sense thank you so much!:001_smile::thumbup:
  • DaveIOW
    DaveIOW Feels At Home Registered Posts: 85
    no worries, good luck
  • Rune
    Rune Feels At Home Registered Posts: 91
    Thanx second time lucky?! You too, wot are you revising for?
  • DaveIOW
    DaveIOW Feels At Home Registered Posts: 85
    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
    Rune Feels At Home Registered Posts: 91
    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
    Pinkjo Feels At Home Registered Posts: 88
    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
    DaveIOW Feels At Home Registered Posts: 85
    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
    Pinkjo Feels At Home Registered Posts: 88
    Thanks!
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