Disposals!!!! Please help!!!

I just can't get my head completely round these - even worse when part exchange allowances come into it too!! And the exam is tomorrow!!!!!

Does anyone have a good way of remembering the ledger entries for this?

My brain has melted totally!! :ohmy:

Comments

  • mikes
    mikes Registered Posts: 254
    In a nutshell, for the disposal account. The original cost of the asset is a debit and the other entries for the depn and sales etc are a credit. The balancing figure is the profit or loss on the sale. A profit is on the debit and a loss on the credit sides.
  • Tinkerbell007
    Tinkerbell007 Registered Posts: 64 ? ? ?
    Thanks for you reply - has made it much clearer!

    I'm still confused with the entries when a part exchange allowance is involved - can you help at all? :001_smile:
  • Vidya_r
    Vidya_r Registered, Tutor Posts: 21 Dedicated contributor ? ? ?
    Initially follow the same steps tht u would do for a disposal and then credit the disposal account with the part exchange allowance and debit the asset account( vehicle/ equipment/ machinery) with the part exchange allowance....

    hope tht helps....
  • LoopyLou!
    LoopyLou! Registered Posts: 9 Regular contributor ⭐ ? ⭐
    This is how I remember it...

    Disposal a/c
    Debit - Original cost

    Credit - Accumulated Depreciation
    Part exchange value/payment received

    Balancing figure will either be...
    Profit - debit balance (increases original cost)
    Loss - credit balance
  • mikes
    mikes Registered Posts: 254
    A part exchange is used in place of the sale proceeds. For this the entries are Debit the Fixed asset with the P/E amount and credit the Disposals account with the same amount. If there is a balance to pay, then you would debit the Fixed asset amount with the balance and credit the bank account.

    The reason for the P/E is going to the fixed asset account, is that basicly you are swapping an old item for a newer one. As you would when you are buying a car.

    Just think of a fixed asset as any item that you own, TV, Stereo etc.
    When it comes to sell it, think, well it cost me say £100 to buy new. That is an expense, so debit the disposals. It has reduced by £25 over a couple of years (accum Depn) - credit disposals. The shop are giving me £25 off the new model, when i trade the old one in. Credit disposals. This gives me a balance of £50 on the credit side, which means that i have made a loss on the orginal item.

    When doing the exam, just change the wording of the item, to something that means something to you and hopefully it will all come back.

    Best of luck.
  • neuroticprincess
    neuroticprincess Registered Posts: 56 ? ? ?
    Could someone clarift this for me please?

    Is the difference that if you receive cash you would Debit Bank, Credit Disposals
    but if its part exchange its Debit Bank, Credit Assets?

    Thanks!
  • numbersishard
    numbersishard Registered Posts: 12 Regular contributor ⭐ ? ⭐
    Could someone clarift this for me please?

    Is the difference that if you receive cash you would Debit Bank, Credit Disposals
    but if its part exchange its Debit Bank, Credit Assets?

    Thanks!

    No, its:-

    cash = debit bank, credit disposals
    p/x = debit [asset at cost account], credit disposals
  • Tinkerbell007
    Tinkerbell007 Registered Posts: 64 ? ? ?
    Thanks for your help guys - hope they are kind this afternoon and it's a nice paper!! Good luck!!! :001_smile:
  • neuroticprincess
    neuroticprincess Registered Posts: 56 ? ? ?
    No, its:-

    cash = debit bank, credit disposals
    p/x = debit [asset at cost account], credit disposals

    Thank you :)
  • foz2000
    foz2000 Registered Posts: 12 Regular contributor ⭐ ? ⭐
    its on the exam paper as well.
Privacy Policy