disposal of fixed assets

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
i need someone explain this to me, i know there 8 entries and there mostly likely 3 T-accounts (asset, depreciation & disposal) .i just wana know what goes where?

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    disposal of fixed assets

    Hi<BR><BR>When there is a disposal you have to remove all elements of the initial cost and accumulcated depreciation relating to that asset at that date:<BR><BR>Step 1 : Remove Cost Dr Disposal<BR> Credit Fixed asset at cost<BR><BR>Step 2 : Remove Accumulated depreciation<BR> Debit accumulated depreciation<BR> Credit disposal<BR><BR>Step 3: If there are any proceeds<BR> Debit bank <BR> Credit disposals<BR> or if they are paying in 30 days replace the debit bank with debit sundry detors<BR><BR>Step 4 Balance off you account if you need more credit<BR> Debit profit and loss <BR> Credit disposals<BR><BR> or if you need more debit<BR> Debit disposals<BR> Credit profit and loss<BR><BR>more debit means you have made a profit and more credit is a loss on the disposal<BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    disposal of fixed assets

    Hi Petrol,<BR><BR>Very clear and well put...<BR><BR>One thing that confuses me is when an asset is disposed of part exchange.. do you Dr - Fixed Asset, Cr - Disposal with the value of the part exchange?????<BR><BR>Thanks<BR>Andy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    disposal of fixed assets

    If its a part exchange its means that the old was sold off for x, cast this as proceeds.<BR><BR>For example: an existing asset was part exchange for £500.00<BR> inital cost of the asset was £5,000 and accumulated depreciation was £4,200<BR><BR>New asset was paid via the bank for £8,000.00<BR><BR>Entries<BR><BR>Step 1 : Debit Disposal £5,000<BR> Credit fixed asset £5,000 (remove the initial cost)<BR><BR>Step 2: Debit accumulated dep £4,200<BR> Credit disposal £4,200<BR><BR>Step 3 Debit fixed asset £8000 (new asset)<BR> Credit Bank<BR><BR>Step 4 Debit Fixed asset £500.00 ( proceeds from part x)<BR> Credit disposals<BR><BR>Step 5 : balance the disposal account off
  • System
    System Posts: 100,534 🤖 Admin 🤖
    disposal of fixed assets

    cheers petrol, that was really helpful

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