Disposal of assets meaning
When the assets become obsolete due to change in technology or fashion or due to end of life. The assets should be disposed, which is the disposal of assets. While disposing of the assets there may be gain or loss or company may dispose of it at scrap value.
The journal entries to keep records for disposing the assets are as follows:
The disposal of assets entries are:
When the asset disposed at scrap value or no gain or loss,
Cash/ bank a/c Dr. xxx
Accumulated depreciation – Asset a/c Dr. xxx
Asset a/c xxx
(To record the disposed or sold the asset at no profit or no loss)
When asset disposed at a profit
Cash a/c Dr. xxx
Accumulated depreciation – Asset a/c Dr. xxx
Asset a/c xxx
Gain on sale of asset a/c xxx
(TO record the sale of the asset on gain)
When asset disposed at a loss
Cash a/c Dr. xxx
Accumulated depreciation – Asset a/c Dr. xxx
Loss on sale of asset a/c Dr. xxx
Asset a/c xxx
(To record the sale of the asset on loss)
Exchange of assets
Sometimes company exchange the old assets with the new. While exchanging the assets there may be profit or loss to the firm. The exchange of asset recorded as follows:
When the asset exchanged at a loss
New asset a/c Dr. xxx
Accumulated depreciation – Old asset a/c Dr. xxx
Loss on exchange of old asset a/c Dr. xxx
Old asset a/c xxx
Cash a/c xxx
(To record the exchange of old asset at on loss)
When the asset exchanged on the gain
New asset a/c Dr. xxx
Accumulated depreciation – Old asset a/c Dr. xxx
Old asset a/c xxx
Gain on exchange of old asset a/c xxx
(To record the exchange of old asset at on gain)