Could any one help me with disposal of fixed asset with loss. I'm pretty alright with making profis (correct me if i'm wrong - I'll put profit to bank account?)
But what i'm supposet to do when there is loss? Should I post it stright to profit and loss a/c or open new account somewhere about 8000 and call it disposal on, e.g., vehicle....?
It's easier to show you by working through an example.
If you had a motor vehicle that, say, cost £5,000, had been depreciated by £3,000, and was sold for £500 (let's ignore VAT in this example), the journal to post would be:
CR 0050 Motor vehicles cost 5,000
DR 0051 Motor vehicles depreciation 3,000
DR 80xx Loss on disposal 2,000
You would have received £500 disposal proceeds. This might be posted as either (i) a bank receipt or (ii) a customer receipt if a sales invoice had been raised. The other side of the bank receipt or sales invoice would be taken to the loss on disposal account. This account would end up showing a £1,500 debit balance, which is the overall loss on disposal.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
Thanks :D And when there is profit (just to be sure) I;ll put it to the CR 80XX profit on disposal DR 1200 Bank A/C ?eg: Bought for £4000 Sold For £2500 Accumulated Depreciation : £1650, then
DR:1200 Bank 2500 DR:8003 Vehicle Depreciation 1650 CR:0050 Fixed Asset Account 4000 CR:80XX Disposal Of Vehicle 150
DR:1200 Bank 2500 DR:8003 Vehicle Depreciation 1650 CR:0050 Fixed Asset Account 4000 CR:80XX Disposal Of Vehicle 150
It's nearly right in terms of the debit and credit entries - the vehicle depreciation code to be debited is the account in the balance sheet (0051), not the one in the profit and loss account (8003).
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
