Disposals Help!
deano_162
Registered Posts: 23 New contributor 🐸
Hi people, Im working at home today due to the weather, and my head has gone completely blank on the disposal of fixed assets! Any Help would be much appreciated. The car was written off meaning the income is and insurance payout.....
Original cost of car - 1500
Depreciation to date - 375
Insurance payout/Proceeds on disposal - 1300
I really should know this but im feeling pretty rusty!
Original cost of car - 1500
Depreciation to date - 375
Insurance payout/Proceeds on disposal - 1300
I really should know this but im feeling pretty rusty!
0
Comments
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Hello,
Complete the disposal in stages as follows: -
1. Strip out vehicle cost:
Dr Disposals 1,500
Cr Motor Vehicle @ Cost 1,500
2. Strip out the accum. depreciation:
Dr Motor Vehicle Accum. Depn. 375
Cr Disposals 375
3. Account for the proceeds:
Dr Bank/Cash 1,300
Cr Disposals 1,300
The above should result in a profit on disposal of 175, eg.
Disposal Proceeds 1,300
NBV of Vehicle (1,125)
Gain on Disposal 1750 -
thanks for your help. Much appreciated0
-
To help you you visualise what is happening and to aid your understanding of this do the following.........
Buy some transparent A4 sheet and draw each "T" account on it (Vehicle, Accumulated Dep, Proceeds from Insurance Co. Cut out each account and lay them on top of eachother and line them up.
What you will see is in effect the Disposals account.
The profit/loss on disposal is the balancing figure and you will see that this is the "Plug figure" when you line all the accounts up. This balancing figure explains the "net" or overall movement on the account or difference between all the transactions in the Disposals account.
Be careful you do not use the word "Gain" as this can relate to Capital gains. Instead use "profit/ loss" on disposal.
I hope this helps??
Regards0
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