Disposals/Sale of assets

Hi all,
After disposing of an asset and making a loss the entries are cr disposals account and dr profit and loss thus increasing expenses and reducing profit.
The extended trial balance will have a dr in adjusments and disposals column carried forward to the profit and loss debit.
But does the extended trial balance need to be adjusted to take out the asset we have sold and any depreciation?
For example if we had 20,000 of assets but sold one that cost 10,000 we have recorded the loss on sale but do we need to remove the 10,000 and carry forward 10,000.

Does anyone understand this?


  • Bluewednesday
    Bluewednesday Registered Posts: 1,624
    Your entries are:

    Dr accumulated depreciation with the depreciation on that asset
    Cr disposals account

    Dr Disposals account
    Cr Asset at cost account

    This will leave the nbv in the disposals account which is used to calculate the profit and loss.

    For example you have a car which was sold for £2000, it originally cost 4000 and there is 1000 depreciation

    Dr acc dep 1000
    Cr disposals 1000
    Dr disposals 4000
    Cr Motor vehicles 4000

    When the sale of the vehicle went through the entry was dr bank cr disposals
    the disposals account now has a debit balance of 1000. To clear this the entry is:

    Dr loss on disposal of fixed assets 1000
    Cr disposals account 1000

    This leaves the disposals account with a nil balance and the asset has been removed from the accounting records.
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Thanks BW :thumbup1:

    To add to that perfect example, I'll just say:

    The journals to create the disposals account will either have been done before producing the TB or they will be done as part of the adjustments in the ETB.

    That means the balance sheet figure for Cost of Assets in your example Keith would be £10,000, as you will have Cr the cost of the disposed asset out of the account either at TB or ETB stage (likewise the associated accumulated depreciation).
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