Buying and Selling non-current assets
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Transcript of Buying and Selling non-current assets
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Open a sundry creditor account (separate to trade creditor)
Disposal of Non current Asset
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Not a stock item
Requires general journal entry
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General Journal
Date Details General Ledger Subsidiary Ledger
Debit Credit Debit Credit Vehicle 35000 gst 3500
Creditor - Best CarsPurchase of a vehicle on credit Inv 376 38500
The General Journal Entries
Buying a Car on Credit
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Disposal of Non-current AssetsAssociated conceptsHistorical CostDepreciationAccumulated Depreciation
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Asset may be scrappedSold for cashTraded in on a replacement asset
It needs to be removed from the firm’s books
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Example of a Disposal of Asset Ledger
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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.
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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
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Reported as a profit, under “Other Revenue” in Profit and Loss Statement
Recorded in sundries column in cash receipts journal
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Carrying value/book valueLoss on disposal of assetProceeds from sale of assetProfit on disposal of assetSundry creditor