Sale of Fixed Asset

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Help I am in a muddle.

Green Ltd purchase a business on 1st April and they have a fixed asset vehicle of 5k (there is a life of 5 years and depreciation is 1k per year). The vehicle is sold at the end of April for 2.5k.

Fixed Asset Vehicle (Balance Sheet)
DR Cost 5k
CR Transfer of cost to Disposal 5k
Therefore zero balance in balance sheet

Fixed Asset Disposal (Profit and Loss)
DR Cost of FA 5k
CR Proceeds of Sale 2.5k
Therefore 2.5k balance (loss) shown in P&L

Bank (Balance Sheet)
DR Proceeds of Sale
Therefore 2.5k in balance at Bank in Balance Sheet

Is the above correct? Should depreciation for the year be charged even though the vehicle was sold in April?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sale of Fixed Asset

    i would of thought it just be a loss of 2.5k of the p and l.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sale of Fixed Asset

    Hi, Yes it was. Does that make a difference?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sale of Fixed Asset

    OK thanks for that - it looks as if I've got the right account entries then. cheers.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sale of Fixed Asset

    sorry edited my post.

    i wouldn't of thought there owuld be need to depreciate the vehicle as youve only had it just under a month
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Sale of Fixed Asset

    Generally in questions set on disposals it's stated if depreciation is to be charged in the year of disposal - usually they say it isn't.

    Chris

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