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Flashcards in Disposal Of Non-C Azzets Deck (7)
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1

What is the first step in disposal?

Remove the cost of the asset being disposed of and assign to the disposals account.

Cr Asset at cost account
Dr Disposals account

2

What is the second step in disposal?

Remove the accumulated depreciation from the old asset to the disposals account.

Dr Asset accumulated depreciation
account
Cr Disposal account

3

What is the third step in disposal?

Make entries for the proceeds (part-exchange allowance).

Cr Disposals account
Dr Assets at cost

4

What is the fourth step in disposal?

Calculate the gain or loss on disposal and record on the profit and Loss account (so later it can be recorded in the statement of profit or loss).

If there is a c/d amount on the Cr side it is a loss.

5

What is the fifth step in disposal?

Record the purchase transaction.

If purchase made on credit Payables will substitute Bank in this operation.

Cr Bank or Payables
Dr Asset at cost

6

How to proceed when an asset is disposed part-way through the accounting period?

1- a full year's depreciation is charged in the year of acquisition and none in the year of disposal or;

2- the last year's depreciation is calculated on the number of months the asset was used for (pro rata, as it were)

7

In disposing of assets, if the selling price includes VAT, how is this dealt with?

The VAT amount will be entered into the Debit side of the Disposals Account and the Credit side of the VAT account.

Ps: the amount received (including VAT) will still be entered into the Credit side of the Disposals Account and the Debit side of the Bank.