How to Dispose an Asset Without Using Asset Disposal Account?

By
Ahuja Sahil
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0

Disposal of Fixed Asset Without Asset Disposal Account

When an asset is being sold a new account called “Asset Disposal Account” is created in the ledger. This account is created to ascertain profit earned or loss incurred on sale of fixed asset, alternatively, all adjustments can be done inside the asset account without opening an assets disposal account. Hence it is possible to dispose of an asset without using Asset Disposal Account.

 

Journal Entries

  • To charge the current period’s depreciation on the asset being disposed,
 Depreciation Account  Debit
 To Asset Account  Credit

 

  • To book the proceeds received from the sale of asset,
 Bank Account  Debit
 To Asset Account  Credit

 

 Asset Account Debit
 To Profit and Loss Account Credit

 

  • In case loss is incurred on the sale of asset then the journal entry will be,
 Profit and Loss Account Debit
 To Asset Account Credit

 

On the date of asset disposal if proceeds from the sale of assets > written down value of the asset then it is said to have created profit.

On the date of asset disposal if proceeds from the sale of assets < written down value of the asset then it is said to have incurred a loss.

 

Short Quiz for Self-Evaluation

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>Read Accumulated Depreciation