Disposal Of Fixed Assets

CONTENT

• Meaning and definition of disposal of fixed asset
• Methods of disposal of fixed assets and their format.
• Practical illustration.

MEANING AND DEFINITION OF DISPOSAL OF FIXED ASSETS.

Fixed assets can be sold in the course of the business due to one reason or the other. The sale of fixed assets is recorded in an account called Assets Disposal Account and it is meant to show the profit or loss made on the sales of such a fixed asset. The accounting procedures on the sale of fixed asset are shown below.

METHOD OF DISPOSAL OF FIXED ASSET

There are two methods of recording disposal of fixed asset. They are the old and new methods of depreciation, on the asset sold

EVALUATION

1.         Define disposal of fixed assets.

2.         Mention the two methods of disposal of fixed assets.

READING ASSIGNMENT

1.         Essential Financial Accounting for S.S. by O.A. Longe Page 115 – 127

2.         Business Accounting 1 by Frank Wood,  Page 82 – 93

3.         Financial Accounting with Ease by Yomi Onafowokan,         Page 65 – 73

GENERAL EVALUATION QUESTIONS

1        What is the difference between depreciation and amortization

2        Give two examples each of assets associated with depreciation and amortization

3        Differentiate between adjustments and closing entries

4        State seven benefits of keeping accounting records in a business

5        List five source documents used in preparing the cash book  

WEEKEND ASSIGNMENT

1.         When fixed assets are sold, it is recorded in ________ (a) depreciation       accounts (b) disposal account (c) sales account (d) deposits account

2.         The following is a method of treating disposal of asset (a) good method      (b) bad method (c) old method of depreciation (d) cash book method

3.         In the old method, depreciation is ________ in the asset account.

            (a) debited (b) credited (c) both debited and credited (d) all of the above

4.         The double entry posting for profit on sale of fixed asset in the provision    method affects the following accounts (a) asset account and provision for depreciation account (b) asset account and profit & loss account (c) assets account and profit & loss account (d) disposal account and profit & loss account

5.         Profit and loss account records profit on sale of asset on _________ side    (a) debit (b) credit (c) left (d) right

THEORY

1.         What is disposal of fixed assets?

2.         What are the necessary entries needed to record profit on sale of asset ?