Disposal of asset and the Extended Trial balance

keithy1978

Hi all,
The question is this:
A vehicle has been disposed of during the year.
- The original cost was £12,000
- The accumulated depreciation was £5,250
- The vehicle was sold for £5,000. This amount was credited to the sales and debited to the bank account.

You need to make all the adjustments required to deal with this disposal. You do not need to adjust the depreciation charge for the year. You do not need to make and adjustments for VAT.

What is confusing me is the fact that the £5,000 has already been debited to the bank.
My answer for the ETB was thus:
Disposals DR 12,000
Vehicles CR 12,000
Disposals CR 5,250
Accumulated Depreciation DR 5,250
Disposals CR 5,000
Bank 5,000

Meaning an expense (loss on sale in the Profit and Loss) of 1,750.

Is this correct?

crispy

Hello,

Your loss on disposal looks all ok to me, however I think the final journal should be:

Dr Sales 5,000
Cr Disposals 5,000

As the proceeds were orignally credited to sales?

keithy1978

Crispy,
Thanks for your reply. I see what you are saying. You still record the proceeds on the CR side of the disposals account but the DR is not the bank as it has already gone in there? So you deduct it from sales for the DR entry.