disposal of assets and exchange of assets entry

Disposal of assets and Exchange of asset entries

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)



 

See also related articles

Double declining balance method

Units of production method

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