Never been this confused before!!!

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:31AM in AAT student discussion
Ive had two lessons for intermediate and i dont understand ANYTHING!!! Is anyone else struggling with the disposals and provisions thing? There are so many methods you have to know and so many T accounts to open. Help!<BR><BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Never been this confused before!!!

    Hi, <BR><BR>I presume by disposals/provisions you're talking about the fixed assets schedule? I do this on a regular basis now at my job but when i was first asked to do it I struggled for a good month to get to grasps with what I was doing and really get my head round it. Then one day I just realised that I was making it harder than it was and everything started falling into place. So my advice would be don't try and make it too difficult and you should start to understand it. <BR><BR>Basically;<BR>If you own something which you then sell you need to put this sale on your fixed asset schedule, and should you either make a profit or a loss on this sale you need to make a provision for this amount in the accounts. For example;<BR><BR>You own a van which is currently priced at £1500 on your brought forward figure. You sell the van for £1250. Therefore there is a loss of £250. This would be shown as;<BR><BR> B/F @?/? Additions Disposals Profit/Loss Deprec. C/F @ ?/?<BR><BR>Van 1500 1250 250<BR><BR>If you then have to post this up you would post the disposal to motor vehicle disposals and the loss to Profit/Loss on Sale<BR><BR>Hope this is of help and was what you were wanting to know!<BR><BR>Sara<BR><BR><BR><BR><BR><BR><BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Never been this confused before!!!

    Yeh thats what im confused about but whats even more confusing is when the depreciation gets involved and how you work out if theres a profit or loss on that. How can u possibly make a profit on something that you've sold for less than u bought it for?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Never been this confused before!!!

    We did depreciation on Monday and I came out of the lesson totally confused. Following a couple of evenings' work, I think I've now got my head round it.<BR><BR>Basically, if you sell an fixed asset for more than the net book value ( NBV = original cost - accumulated depreciation) then you have made a 'profit', if less you make a 'loss'. So your postings in the disposal account for the sale of (eg) a van would be<BR><BR>Credit: <BR>Vehicles: original cost of item<BR><BR>Debit:<BR>Bank (or creditor a/c or whatever depending on circumstances): selling price<BR>Provision for vehicle dep'n: accumulated depreciation on the van at the time of selling<BR><BR>The balancing value gives you the P&L figure, profit if a debit, loss if a credit.<BR><BR>In this case the terms 'profit' and 'loss' are really just accounting conventions (though they <i>do</i> have real tax implications) and not profits and losses in the everyday sense. <BR><BR>Hope that helps<BR><BR>Chris<BR><BR><BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Never been this confused before!!!

    Thanks Chris that helped a lot. Think im starting to get the hang of a few things now. Cheers.<BR><BR>Chris.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Never been this confused before!!!

    I totally agree- i am 5 lessons in to my course and although i am able to do the work when im looking back at examples i dont know how im going to remember it all in my exam.<BR><BR>i found foundation really easy, although i knew this year would be harder i didnt think it would be this hard.<BR><BR>U've made me feel loads better- to think its not just me being thick!!<BR><BR>thanx

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