How to record the disposal of an asset
When an asset is sold, its cost and depreciation leave the books. Find the profit or loss and use the disposals account.
Task 1Profit or loss on disposal4 questions
When an asset is sold or scrapped, it must come out of the books. This is a disposal.
Compare what the asset was sold for, called the proceeds, with its carrying amount at the date of sale.
- Proceeds more than carrying amount: a profit on disposal
- Proceeds less than carrying amount: a loss on disposal
The following year, Skelwith sells bagging machine B1 for £6,400, paid into the bank. B1 cost £9,600 and its accumulated depreciation is £3,600. Skelwith charges no depreciation in the year of sale.
Task 2The disposals account3 questions
Task 3A loss, and the whole entry at once3 questions