1. Disposal of fixed assets are sold or trade fixed assets. Fixed assets can be sold for cash or exchanged for purchased assets with a new more efficient and sophisticated
2. Account asset disposals (sales account assets) was opened when the asset is disposed to determine whether gains or losses arising from the disposal of assets.
3. If the assets are sold at a price higher than its value book, the profit will be obtained. If the sale price of the assets is less than its value book, the loss is obtained. If the assets are sold at a price higher than its value book, the profit will be obtained. If the sale price of the assets is less than its value book, the loss is obtained.
4. Profit or loss from the disposal of assets transferred to the Profit and Loss Account:
(a)Profit on Disposal of Assets > Profit and Loss Credit Account
(b) Loss on Disposal of Assets > Profit and Loss Debit Account
5. Profit or loss from the disposal of assets is not a profit or loss of control of the business as it is not due to the activity of buying and selling merchandise 6. Manual recording of the disposal of assets is shown in the following table:
| Steps | How to record |
|---|---|
| a) Transfer the cost of the assets sold to the Fixed Asset Disposal Account. | Disposal of Fixed Asset Account Debit Fixed Asset Account Credit. . |
| b) Transfer the provision for diminution of assets sold to the Fixed Asset Disposal Account. | Provision of asset depreciation Account Debit Disposal of Fixed Asset Account Credit |
| c) Payment received from asset disposal. | Bank/Cash Account Debit Fixed Asset Disposal Accounts Credit |
| d) Profit on disposal of Assets (difference in asset disposal account is located next to debit). | Fixed Asset Disposal Account Debit Credit Account of Profit from Assets Disposal Debit Account of profit from Asset Disposal Credit of Profit and Loss Account |
| e) Loss on disposal of assets (Difference in Account Disposal is located on credit) | Debit Account Loss from Asset Disposal Fixed Asset Disposal Accounts Credit Debit Account of profit from Asset Disposal Credit of Profit and Loss Account |
Profit From Fixed Asset Disposal
Example
The cost of Machine : RM4,000
Date of Purchasing Machine : January 1, 1996
Depreciation Rate : 10% on cost
Date of Sale Machine : December 31, 1999
Selling Price of Machine : RM2,600
Example
| Year Ended December 31 | Depreciation (RM) | Provision of Depreciation (RM) |
|---|---|---|
| 1996 | 400 | 400 |
| 1997 | 400 | 400 |
| 1998 | 400 | 1200 |
| 1999 | 400 | 1600 |
Change And Purchase The New Asset With New Asset
The guide to recording the purchase of old assets with the new is as follows:
| Steps | How to record |
|---|---|
| (a) Transfer the cost of fixed assets disposed of to the Fixed Asset Disposal Account | Disposal of Fixed Asset Account Debit Fixed Asset Account Credit. |
| (b) Transfer the allowance for diminished assets to the Fixed Asset Disposal Account | Provision of asset depreciation Account Debit Disposal of Fixed Asset Account Credit. |
| (c) Long-term buy-back assets with new assets (at long-term fixed assets exchange rates) | Fixed Asset Debit Account Disposal of Fixed Asset Account Credit. |
| (d) The difference between the new asset price and the old fixed assets paid by check / cash (in the amount paid) | Bank/Cash Account Debit Fixed Asset Disposal Accounts Credit |
| (e) Profit from the disposal of fixed assets (difference in Asset Disposal Account is located on the debit side) | Fixed Asset Disposal Account Debit Credit Account of Profit from Assets Disposal Debit Account of profit from Asset Disposal Credit of Profit and Loss Account |
| (f) Loss on disposal of assets (Difference in Asset Disposal Account is located next to credit) | Debit Account Loss from Asset Disposal Fixed Asset Disposal Accounts Credit Debit Account of profit from Asset Disposal Credit of Profit and Loss Account |