Custom Search

(38)-ACCOUNTING FOR FIXED ASSET DISPOSALS

Monday, November 30, 2009

Accounting For Fixed Asset Disposals

Fixed assets are not purchased by a business with the intention of reselling them in the normal course of trade. However they might be sold off at some stage for example a business may sell fixed assets when their useful life is over.

Whenever a business sells something it makes a profit or loss. So when fixed assets are disposed of there is a profit or loss on disposal. This is a capital gain or a capital loss.

These gains or losses are reported in the profit and loss account of the business but not as a trading profit. They are commonly referred to as profit on disposal of fixed assets or loss on disposal.

The profit or loss on the disposal of a fixed is the difference between,
  • The net book value of the asset at the time of its sale.
  • Its net sale price which is the price minus any costs of making the sale.

A profit is made when the sale price exceeds the net book value and a loss is made when the sale price is less than the net book value.

0 comments:

Post a Comment

About Me

My Photo
Management Consultant.
Financial management and business management specialist.
View my complete profile

WELCOME

WELCOME ALL.....................................................,

If you have any problems regarding accounting please comment in this site and let we know SURELLY WE ANSWERED...................................,