Disposal of Fixed Asset Without Asset Disposal Account
When an asset is being sold a new account called “Asset Disposal Account” is created in the ledger. This account is created to ascertain profit earned or loss incurred on sale of fixed asset, alternatively, all adjustments can be done inside the asset account without opening an assets disposal account. Hence it is possible to dispose of an asset without using Asset Disposal Account.
Journal Entries
- To charge the current period’s depreciation on the asset being disposed,
| Depreciation Account | Debit |
| To Asset Account | Credit |
- To book the proceeds received from the sale of asset,
| Bank Account | Debit |
| To Asset Account | Credit |
- In case profit is earned on sale of asset then the journal entry will be,
| Asset Account | Debit |
| To Profit and Loss Account | Credit |
- In case loss is incurred on the sale of asset then the journal entry will be,
| Profit and Loss Account | Debit |
| To Asset Account | Credit |
On the date of asset disposal if proceeds from the sale of assets > written down value of the asset then it is said to have created profit.
On the date of asset disposal if proceeds from the sale of assets < written down value of the asset then it is said to have incurred a loss.
Short Quiz for Self-Evaluation
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