Hi, im a trainee accountant and accountant has asked me to do journals for the disposal of a motor vehicle... which iv never done before ( part exchange.) Bought a vehicle and used the old one as a trade in. need to know the journals, please help.... :)
Presume you've already asked the accountant and not got anywhere!
If the old vehicle cost £20k, had been written down to £10k and was p/x for £8k, the journal would be:
Dr FA (new) £8k Cr FA (cost) £20k Dr FA (acc dep'n) £10k Dr loss on disposal £2k
Re the new vehicle, if it cost £30k and it was being paid for £22k cheque and £8k p/x, you've already entered the £8k above, so you simply post the payment against FA
Don't know what courses you are studying but this should be covered on any accounting training course.
You would need to dispose of the vehicle as usual so
Fixed Asset CR the value of the car and DR Vehicle disposals account Vehicle Depreciation DR the full depreciation CR Disposals Rather than CR proceeds to the Disposals and DR bank you would CR part exchange value and DR the fixed assets and also DR Fixed assets for the cost of new vehicle (minus pert exchange) and CR bank. Any loss or profit from the sale would be DR/CR profit and loss account.
So say you bought a vehicle for £10000.00 you would show the acquisition as;
DR Fixed assets £10000.00 CR Bank £10000.00
If you then proceeded to depreciate the vehicle over the next 4 years at 25% straight line no residual value it would end up at zero value and you would have in your accounts;
CR Depreciation £10000.00 DR Depreciation charge £10000.00
So your vehicle would be worthless. You then proceed to dispose of the vehicle and someone offers you £1000.00 part exchange so you would;
CR Fixed assets £10000.00 (cost of vehicle this balances that particular section of the fixed asset account) DR Disposals £10000.00
You would then clear the Depreciation account for the vehicle which would be; DR Depreciation £10000.00 (depreciation for that particular vehicle will be balanced off) CR Disposals £10000.00
Because you have acquired £1000.00 for the vehicle in part exchange you would;
DR Fixed assets £1000.00 CR Disposals £1000.00 (similar to selling the vehicle except you wont be DR bank as a proceed you will instead be DR fixed asset as a proceed towards your newly acquired vehicle)
Any balance left in the disposals account (in your case it would be a DR balance of £1000.00) should be transferred to Profit and loss account so;
DR Disposals £1000.00 CR Profit and loss £1000.00
If the new vehicle has cost £10000.00 new and you paid £1000.00 with the part exchange then your fixed asset account will show;
DR Fixed assets £1000.00 (part exchange value) DR Fixed assets £9000.00 (value of vehicle after part exchange has been taken off) CR Bank £9000.00 (the 1000.00 CR will be in the disposals account)
I think :)
-- Edited by Rhianrach on Tuesday 8th of March 2011 02:17:15 PM
Same here, went over it on the course then when posed with the question stammered a bit, but in essence it's simple rather then post the DR to the bank DR it to the fixed asset account instead as part payment and that's the only difference.
