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How to Dispose an Asset Without Using Asset Disposal Account?

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 an asset without using Asset Disposal Account.

 

Journal Entries

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

 

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

 

 Asset AccountDebit
 To Profit and Loss AccountCredit

 

  • In case if loss is incurred on sale of asset then the journal entry will be
 Profit and Loss AccountDebit
 To Asset AccountCredit

 

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

 

>Read Accumulated Depreciation