Interview
Asset Disposal Step by Step
- Course
- Institution
This step by step format gives an overview of how to tackle any asset disposal problem with certain steps that can be followed instead of doing it all in one step.
[Show more]
Seller
Follow
bhavii0415
Content preview
How to do Asset Disposal step by step.When assets are disposed:
1. The asset is disposed of at the end of the year.
2. The asset is disposed in the middle of the year.
Assets can be disposed in three ways:
1. Sold for cash.
2. Sold on credit to a debtor.
3. Taken over by a partner. (This one is particularly common in the partnerships section when
doing adjustments for the financial statements.)
Asset disposed at end of year.
Asset disposal can be broken down into 5 steps. To make explanation easier we will work with an
example.
Year ended: 28 February 2020.
A vehicle with a cost price of R300 000 was sold for R40 000 on the 28th of February 2020. Vehicles
are depreciated at 10% per annum (fixed method). Accumulated depreciation on the 1st of March
2019 was R210 000.
This is a lot of information in one sentence so let us break it down into pieces.
Cost price: R300 000
Selling price: R40 000
Accumulated depreciation: R210 000 (this amount is given for the beginning of the financial year
indicating we must calculate the depreciation for the year.)
So let us begin with the calculations.
Step 1: Accumulated depreciation for CURRENT YEAR.
Rate of depreciation is 10%. Since this asset was disposed at the end of the year, we calculate for the
entire year.
300 000 x 10/100 = 30 000 Debit depreciation
Credit Acc. Depr. on vehicles
A common mistake here is that we forget to add this amount to the Depreciation account. This is
extremely important because this asset has been used by the business for the year and it must be
recorded.
Step 2: Recording the cost price of the asset.
Cost price: 300 000 Debit Asset disposal
Credit Vehicles
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller bhavii0415. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.62. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67474 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now