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Asset Disposal Process Guide

The document outlines the steps for asset disposal, including calculating depreciation for vehicles and equipment, transferring costs and accumulated depreciation to asset disposal, and recording the selling price based on various sale methods. It also details how to calculate profit or loss on the sale of an asset by determining the carrying value and comparing it to the sales price. The process is structured to ensure accurate financial reporting during asset disposal.

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Decide Mkansi
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35 views5 pages

Asset Disposal Process Guide

The document outlines the steps for asset disposal, including calculating depreciation for vehicles and equipment, transferring costs and accumulated depreciation to asset disposal, and recording the selling price based on various sale methods. It also details how to calculate profit or loss on the sale of an asset by determining the carrying value and comparing it to the sales price. The process is structured to ensure accurate financial reporting during asset disposal.

Uploaded by

Decide Mkansi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

STEPS TO FOLLOW IN ASSET DISPOSAL

1. Calculate depreciation

a) Vehicles
● Old
● New
● Sold
b) Equipment
● Old
● New
● Sold
Accumulated depreciation on…

Balance b/d x
[Link]

Depreciation

1. Accumulated depreciation
on vehicles

1. Accumulated depreciation
on equipment

2. Transfer cost price of sold asset to Asset disposal


Vehicles

Balance b/d x 2. Asset


disposal x

Asset disposal

2. Vehicles x

1
3. Transfer Total Accumulated depreciation on asset sold to Asset disposal
Accumulated depreciation on vehicles

3. Asset disposal Balance b/d x

Depreciation

Asset disposal

Vehicles x Accumulated
depreciation on
vehicles

4. Record and transfer Selling Price to Asset disposal

a) If asset is sold for cash:


Bank

5. Asset disposal

Asset disposal

2. Vehicles x 3. Accumulated
depreciation on
vehicles

4. Bank

b) If asset is sold on credit:


Debtor’s control

[Link] disposal

Asset disposal

2. Vehicles x 3. Accumulated
depreciation on vehicles
[Link] control

2
c) If asset is traded in:
Creditors Control

[Link] disposal

Asset disposal

2. Vehicles x 3. Accumulated
depreciation on vehicles
[Link] control

d) If owner takes asset:


Drawings

[Link] disposal

Asset disposal

2. Vehicles x 3. Accumulated
depreciation on vehicles
[Link]

5. Calculate the Profit or Loss on sale of Asset and transfer to Asset disposal

a) Calculate the Carrying value/ Book value

Cost price – Accumulated depreciation = Carrying value/ Book value

3
b) Calculate the Profit or Loss on sale of Asset

Sales Price – Carrying value/ Book value = + Profit on sale of Asset

Profit on sale of Asset

5a. Asset disposal

Asset disposal

2. Vehicles x 3. Accumulated
depreciation on vehicles
5a. Profit on sale of [Link]/ Drawings/
Asset Debtors Control/
Creditors control

XX XX

OR

Sales Price – Carrying value/ Book value = – Loss on sale of Asset

Loss on sale of Asset

5b. Asset disposal

Asset disposal

2. Vehicles x 3. Accumulated
depreciation on vehicles
[Link]/ Drawings/
Debtors Control/
Creditors control
5b. Loss on sale of
Asset
XX XX

4
OR

Sales Price – Carrying value/ Book value = 0

Asset disposal

2. Vehicles x 3. Accumulated
depreciation on vehicles
[Link]/ Drawings/
Debtors Control/
Creditors control

XX XX

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