Fixed asset disposal

GreenMousey

I'm quite confused. I'm basically doing a question where the disposal of the asset is accompanied by part exchange. I understand what I'm doing with it except the part exchange is for £4700 (inc VAT). I've taken the £700 VAT out of the amount and credited it to the VAT account to claim it back...but I don't know where to debit.

The part exchange wasn't given in cash it was merely taken off the total amount due on the invoice for the new asset. I just can't think what to do with the VAT in regards to the debit side :confused1: ...any help would be greatly appreciated.

Thanks

Mouse x

coojee

Hi Mouse

You need to think of the whole transaction rather than just trying to post the £700. The complete journal is DR Fixed Asset (with cost of new asset), DR VAT (if there is any on the new asset) CR Bank/Creditors (with balance payable on purchase of new asset, CR Disposals with £4000 and CR VAT with £700. For example, if the new asset is £10,000 plus VAT then journal is:

DR Fixed Asset Cost 10,000
DR VAT 1,750
CR Bank 7,050
CR Disposals 4,000
CR VAT 700

GreenMousey

I've done all the other transactions but I'm stuck with 700 CR on my VAT that doesn't have an equal debit entry...
Am I missing something here? (Other than a brain) I've just never come across VAT on the part exchange amount before and, as I said, all the other entries are fine, I understand it's just the dr for the 700 that I can't seem to place.

coojee

Have you seen my reply at all? I think it explains what you need to know.

Bluewednesday

The VAT won't have an equal debit entry, it is part of the whole journal.

Coojee's journal is correct so if you haven't got those entries (even in a slightly different format) then you haven't got it right, what are your other entries?

GreenMousey

My apologies, it was late and my brain went AWOL. I'd not accounted for the VAT on the new asset...it all makes sense now, thank you for your help, it's very much appreciated.