Please can someone help me (jennie.c75)
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Hi im doing unit 5 simulation financial records and accounts next tuesday and am seriously confused when it comes to entering disposals and acquistions into the ledgers and the journal from the fixed asset register . why does it have to be entered into so many different accounts can someone please explain it to me also do i post amount net of vat. i done a practice sim today and seriously must of messed up as my trial balance was way out . Really apreciate any help and advice.
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Comments
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Re:Please can someone help me (jennie.c75)
There is a post further down the list called 'TRADE IN' that may be off some help with the journals, including VAT.
There are past exam papers with answers on the AAT website. Practice on those and you might pinpoint where you are going wrong on your TB, however I would strongly suggest you have your tutor work through the simulation with you if you 'seriously messed' up your TB.
I have problems with my debits and credits so the first thing I do when I start my paper is write out my notes i.e
Debtors = Dr Creditor = CR
then it stand to reason.
Debtors DR Sales = CR
Creditors CR, Purchases = DR
Going further with payments
Bank DR (money in), Debtor CR
Bank CR (money out), Creditor DR
With Debtors (DR), Creditors (CR), Sales Cr, Purchases (Expense) Dr, Money in (DR), Money out (CR) I can then work out where to place the rest.
Perhaps something as simple as that will help you, I know it has saved me plenty of times in the past.0 -
Re:Please can someone help me (jennie.c75)
Disposing of fixed assets can be quite complex. If you consider that when a company sells a fixed asset, it needs to completely remove it from the books. If you consider what the original journal entries would have been to bring the asset in:
Debit fixed assets,
Credit cash.
Depreciation journals throughout the period would have been:
Credit depreciation (fixed asset balance sheet)
Debit depreciation charge in the profit and loss
When the asset is sold, we need to remove its net book value from the balance sheet, therefore reversing the above journals as follows:
Credit fixed assets - cost
Debit accumulated depreciation
and debit or credit the difference in the above two journals to profit and loss on sale of assets in the profit and loss account.
The proceeds on sale of the asset would be:
Debit cash
Credit profit or loss on sale of assets in the profit and loss account.
I hope that helps you. A thread screen is not ideal for illustrating the above using a T account, unfortunately.
Kind regards
Steve0 -
Re:Please can someone help me (jennie.c75)
I'd prepared an answer to this prior to Steve's as usual superb explanation but will respond anyway to try and complement it with numbers;
Example;
Original cost of asset; £10,000 (net of VAT since this has already been reclaimed from when the asset was first purchased)
Accumulated depreciation; £5,000
Asset sold for £4,000
Straight away we can see that we sold at a £1,000 loss before even doing any T accounting.
It might help to remember this from the three stage acronym ADS, as below;
Stage one;
A = Asset (disposal of)
Credit asset account with the full £10,000 original cost
Debit disposals account £10,000
Stage two;
D = Depreciation (accumulated)
Debit accumulated depreciation account £5,000
Credit disposals account £5,000
Stage three;
S = Sale (of asset)
Debit bank account with the £4,000 proceeds
Credit disposals account £4,000
When you total up the disposals account, there will be £10,000 on the debit side and only £9,000 on the credit side representing the £1,000 loss. This will be transferred to the P&L account, with a title like 'Loss on sale of fixed asset' or similar.
The journal adjustments for the ETB are therefore not too dissimilar from the primary information first given above but we now know what goes where and can see confirmation of the loss suffered;
Credit fixed asset account; £10,000
Debit accumulated depreciation; £5,000
Debit bank account; £4,000
Debit 'Loss on sale of fixed asset' (expended through the P&L account); £1,000
The disposals account doesn't appear in the ETB since it's only a temporary holding account while we make the necessary stage by stage adjustments.
Alternatively, if we'd sold the asset for £6,000, the £1,000 profit would be credited to the P&L under 'Other income' or 'Profit from sale of fixed asset'.
Regards
Robert0 -
Re:Please can someone help me (jennie.c75)
Robert has explained it well using numerical information. My explanation was geared around what happens in the workplace which isn't any different than in exams but the techniques used in theory (certainly from a marking process angle) can be somewhat different.
Kind regards
Steve0 -
Re:Please can someone help me (jennie.c75)
Thankyou so much for your help
Things seem alot clearer, bit of practice and i think i may be alright to sit simulation next week . Although this course has been a bit of a struggle fast-track is so intense and i dont feel we absorb all the information required . No doubt i will need your help again soon ,with units 6 & 7 Thanks again x x x 0 -
Re:Please can someone help me (jennie.c75)
Hi
Is it the same process if it a part exchange?
Thanks0 -
Re:Please can someone help me (jennie.c75)
Let’s link these together since they cover similar territory;
Sale of an asset; http://forums.aat.org.uk/forums/posts/list/15421.page#87764
Part exchange of an asset; http://forums.aat.org.uk/forums/posts/list/15456.page
Regards,
Robert
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Re:Please can someone help me (jennie.c75)
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