VCE Accounting Unit 4

1. 17.7
PROCEDURE FOR ASSET
DISPOSAL

2. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
17.7 PROCEDURE FOR ASSET
DISPOSAL
 The disposal of an asset requires the creation of two new
accounts are required to record a disposal…
Profit on Disposal of Asset [R]
Loss on Disposal of Asset [E]
Disposal of Asset
New account #1
New account #2

3. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
17.7 PROCEDURE FOR ASSET
DISPOSAL
 Example:
2015 2016 2017
Cost
$2,000
$400 $300 $200
Carrying
Value
$1,600
Carrying
Value
$1,300
Carrying
Value
$1,100
Sold for
$800 here…
Loss on Disposal
$300
Laptop [A]
30/6 Balance 2000
Accumulated Dep’n – Laptop [-A]
30/6 Balance 900
Cash [A]
30/6 Balance 800

4. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
17.7 PROCEDURE FOR ASSET
DISPOSAL
 New account #1…
Profit on Disposal of Asset [R]
Debit Credit
Revenue  
Profit on Disposal of Asset [R]
300
Debit Credit
Revenue  
or…
Loss on Disposal of Asset [E]
Debit Credit
Expense  
Loss on Disposal of Asset [E]
300
Debit Credit
Expense  
• Used to transfer the
profit or loss on
disposal
• Closed to Profit and
Loss Summary on
Balance-Day
Profit on Disposal of Asset [R]
30/6 P & L Summary 300 300
Loss on Disposal of Asset [E]
300 30/6 P & L Summary 300

5. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
17.7 PROCEDURE FOR ASSET
DISPOSAL
 New account #2…
• Temporary account – balance-day only
• Repository used to transfer all other
accounts
• Determines the profit or loss on
disposal
• Closed at end of the day
Disposal of Laptop
30/6 Laptop 2000 30/6 Acc Dep 900
30/6 Cash 800
30/6 Loss on disp 300
2000 2000
Laptop [A]
30/6 Balance 2000 30/6 Disp on asset 2000
2000 2000
Accumulated Dep’n – Laptop [-A]
30/6 Disp on asset 900 30/6 Balance 900
900 900
Cash [A]
30/6 Disp on asset 800
Loss on Disposal of Laptop [E]
30/6 Disp on asset 300
Disposal of Laptop
30/6 Laptop 2000 30/6 Acc Dep 900
30/6 Cash 800
30/6 Loss on disp 300
2000 2000
Laptop [A]
30/6 Balance 2000 30/6 Disp on asset 2000
2000 2000
Accumulated Dep’n – Laptop [-A]
30/6 Disp on asset 900 30/6 Balance 900
900 900
Disposal of Laptop
30/6 Laptop 2000 30/6 Acc Dep 900
30/6 Cash 800
30/6 Loss on disp 300
2000 2000
Cash [A]
30/6 Disp on asset 800
Disposal of Laptop
30/6 Laptop 2000 30/6 Acc Dep 900
30/6 Cash 800
30/6 Loss on disp 300
2000 2000
Loss on Disposal of Laptop [E]
30/6 Disp on asset 300
Disposal of Laptop
30/6 Laptop 2000 30/6 Acc Dep 900
30/6 Cash 800
30/6 Loss on disp 300
2000 2000
Disposal of Laptop
30/6 Laptop 2000 30/6 Acc Dep 900
30/6 Cash 800
30/6 Loss on disp 300
2000 2000

6. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
17.7 PROCEDURE FOR ASSET
DISPOSAL
• Where would a disposal of an Asset be recorded?
Cash receipt Cheque butt
Sales invoice
Purchase
invoice
Cash Receipts
Journal
Cash Payments
Journal
Sales Journal Purchases Journal
Any cash received? Any cash paid?
Credit sale made? Credit purchase of stock made?
Memo General Journal
Any other transaction?

7. © Michael Allison, Trinity Grammar School.
Author’s permission required for external use
TASK
In-class Homework
SQ4 X