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1. When an asset is disposed of, any loss or gain is calculated as the difference between the carrying value and sale proceeds. In this example, there was a £3,000 loss on the disposal of an asset with a cost of £12,000 and accumulated depreciation of £5,000 that was sold for £4,000.
2. The disposal is recorded through ledger entries that credit the disposal account for the carrying value and sale proceeds, and debit accumulated depreciation and cash accounts.
3. A disposal transaction is also recorded through a journal entry, debiting the disposal account for the carrying value and crediting the asset and accumulated depreciation accounts. Any proceeds are recorded by
1. When an asset is disposed of, any loss or gain is calculated as the difference between the carrying value and sale proceeds. In this example, there was a £3,000 loss on the disposal of an asset with a cost of £12,000 and accumulated depreciation of £5,000 that was sold for £4,000.
2. The disposal is recorded through ledger entries that credit the disposal account for the carrying value and sale proceeds, and debit accumulated depreciation and cash accounts.
3. A disposal transaction is also recorded through a journal entry, debiting the disposal account for the carrying value and crediting the asset and accumulated depreciation accounts. Any proceeds are recorded by
1. When an asset is disposed of, any loss or gain is calculated as the difference between the carrying value and sale proceeds. In this example, there was a £3,000 loss on the disposal of an asset with a cost of £12,000 and accumulated depreciation of £5,000 that was sold for £4,000.
2. The disposal is recorded through ledger entries that credit the disposal account for the carrying value and sale proceeds, and debit accumulated depreciation and cash accounts.
3. A disposal transaction is also recorded through a journal entry, debiting the disposal account for the carrying value and crediting the asset and accumulated depreciation accounts. Any proceeds are recorded by
(a) Profit or loss on disposal £ Cost 12,000 Depreciation (5,000) –––––– CV 7,000 –––––– Comparing the carrying value of £7,000 with the sale proceeds of £4,000, there is a loss of (7,000 – 4,000) = £3,000. (b) Ledger account entries Disposal of non-current assets account £ £ Car cost 12,000 Accumulated depreciation 5,000 Cash at bank a/c (sales proceeds) 4,000 Loss on disposal 3,000 –––––– –––––– 12,000 12,000 –––––– –––––– Car account £ £ Balance b/d 12,000 Disposal a/c 12,000 –––––– –––––– Car accumulated depreciation account £ £ Disposal a/c 5,000 Balance b/d 5,000 –––––– –––––– Cash at bank account £ £ Disposal a/c 4,000 Test your understanding 2 Journal entry No 235 Date 13 June 20XX Prepared by A Tech Authorised by B Jones Account Code Debit Credit £ £ Disposals 0240 20,000 MV at cost 0130 20,000 MV acc dep'n 0140 7,500 Disposals 0240 7,500 Cash at bank 0163 10,000 Disposals 0240 10,000 Test your understanding 3 Disposals account £ £ Motor vehicles 12,000 Accumulated depreciation 3,800 Profit on disposal 1,800 Motor vehicles (part ex) 10,000 –––––– –––––– 13,800 13,800 –––––– –––––– Accumulated depreciation = £12,000 × 20% × 19/12 = 3,800