Why might we sell a non-current asset?

Not a stock item. Why?

Requires general journal entry

Sundry Creditors

Disposal of Assets

General Journal

Date DetailsGeneral Ledger

Subsidiary Ledger

Debit Credit Debit Credit Vehicle 35000 gst 3500

Creditor - Best Cars 38500

The General Journal Entries

Disposal of Non-current AssetsAssociated conceptsHistorical CostDepreciationAccumulated Depreciation

Asset may be scrappedSold for cashTraded in on a replacement asset

It needs to be removed from the firm’s books

Transfer assets’ historical cost to the Disposal of Asset account

Transfer accumulated depreciation to Disposal of Asset account

Show amount received from sale of asset in Disposal account

Close the Disposal of Asset account to the Profit or Loss on sale of the asset.

Item is not popular therefore little demand

May be obsolete technologically (eg computer)

It may be damaged or severely marked

The accumulated depreciation may not have been accurate.

A loss will be reported as an expense in the Profit and Loss statement

Reported as a profit, under “Other Revenue” in Profit and Loss Statement

Recorded in sundries column in cash receipts journal

Carrying value/book valueLoss on disposal of assetProceeds from sale of assetProfit on disposal of assetSundry creditor