{m}.{s}.1Example set 2

There now follows a set of seven questions relating to fixed assets and depreciation for a VAT registered trader.

In all cases we will use the same account codes.

Open/Close{m}.{s}.Q1
Open/Close{m}.{s}.Q2
Open/Close{m}.{s}.Q3
Open/Close{m}.{s}.Q4
Open/Close{m}.{s}.Q5
Open/Close{m}.{s}.Q6
Open/Close{m}.{s}.Q7

{m}.{s}.2Transfer of NBV entries

Note that in the last example we transferred the net book value in one entry instead of two.

We combined the entry to transfer the cost with the entry to transfer the accumulated depreciation.

[{m}.{s}a]

If you find it clearer, continue to use two entries instead of combining them to make one entry.

We can see that the two ways have the same result in the T accounts [{m}.{s}b].

Note that where we are dealing with the scrapping rather than the sale of an asset the entries are exactly the same except there are no sale proceeds.

The loss on disposal is therefore simply equal to the net book value. Above, the loss would be £1,500 to be transferred to the profit and loss.

Plant - cost
Bal b/f xxx Disposals 5,000
       
       
       
Plant - acc depn
Disposals 3,500 Bal b/f xxx
       
       
       
Disposals
Cost 5,000 Acc dpn 3,500
    P&L - loss 1,500
  5,000   5,000
       
 

[{m}.{s}b]

is the same as:

Plant - cost
Bal b/f xxx Disposals 5,000
       
       
       
Plant - acc depn
Disposals 3,500 Bal b/f xxx
       
       
       
Disposals
Plant 1,500 P&L - loss 1,500
       
       
       
 

[{m}.{s}c]