HELP ME WITH DISPOSAL OF F.A!

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I CANT GET MY HEAD AROUND THE DOUBLE ENTRY PROCEDURES OF A FIXED ASSET DISPOSAL!<BR><BR>HOW MANY ACCOUNTS NEED TO BE OPENED AND USED TO COMPLETE THIS TASK? <BR>AND WHICH ACCOUNT REPRESENTS THE PROFIT/LOSS OF THE DISPOSAL OF THE F.A?<BR><BR>DOES ANYONE HAVE ANY SUGGESTIONS AS TO HOW I CAN REMEMBER THIS PROCEDURE?

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    HELP ME WITH DISPOSAL OF F.A!

    HI,<BR><BR>YOU NORMALLY NEED THREE A/CS. THERE'S YOUR FIXED ASSET A/C, YOUR RESPECTIVE ACCUM DEPREC A/C & YOUR DISPOSAL A/C.<BR><BR>THE FIRST RULE IS TO CLEAR OUT THE COST FROM YOUR FIXED ASSET A/C & TRANSFER THIS TO THE DISPOSAL A/C, IE, <BR><BR>DR DISPOSAL A/C, CR FIXED ASSET A/C.<BR><BR>SECONDLY, YOU NEED TO REMOVE THE DEPRECIATION FROM THE ACCUM DEPREC A/C, IE,<BR><BR>DR ACCUM DEPREC A/C, CR DISPOSAL A/C<BR><BR>THE TOP AND BOTTOM OF THIS IS THAT YOU WILL NOW HAVE A DEBIT ON YOUR DISPOSAL A/C REFLECTING THE ORIGINAL COST & A CREDIT ON YOUR DISPOSAL A/C REFLECTING ALL THE DEPRECIATION CHARGED TO THE P & L OVER THE YEARS FOR THIS PARTICULAR ASSET.<BR><BR>THE PROCEEDS FROM THE SALE OF THE FIXED ASSET ARE THEN CREDITED TO THE DISPOSAL A/C, IE, <BR><BR>DR BANK, CR DISPOSAL A/C.<BR><BR>YOU THEN NEED TO RECONCILE YOUR DISPOSAL A/C. IF THERE IS A DEBIT BALANCE O/S, YOU WRITE OFF THE BALANCE TO THE P & L A/C AS A LOSS (EXPENSE). IF IT'S A CREDIT BALANCE, YOU POST THE DIFFERENCE TO THE P & L A/C AS A PROFIT (REVENUE), IE, <BR><BR>IF LOSS - DR P & L A/C, CR DISPOSALS<BR>IF PROFIT, DR DISPOSALS, CR P & L A/C.<BR><BR>IT GETS A LITTLE TRICKIER WHEN PART EXCHANGES ARE INVOLVED. THAT'S FOR ANOTHER TIME!!<BR><BR>REGARDS,<BR><BR>DAVID
  • System
    System Posts: 100,534 🤖 Admin 🤖
    HELP ME WITH DISPOSAL OF F.A!

    Thankyou that makes things clearer now!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    HELP ME WITH DISPOSAL OF F.A!

    David's done an excellent job of explaining it above. Just an added suggestion.<BR><BR>The exam questions tend to ask you to show the relative journal entries. I use the spare pages to draw out the 'T' accounts as they start. I use a black pen for this. Then, I enter the relevant double entries in red. That way, when I come to write up the journal, the entries stand out. I also journal each one individually. That way, there's less chance of making mistakes.

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